A blank blank blank or a less costly blank blank blank - both strategies being options based - would both be suited to a market view that the underlying price was generally expected to break lower prior to the maturity of the option(s). Assuming the price of the underlying moved as expected, and both strategies were priced using the same σ, a higher profit would be achieved using the blank blank
Question
A blank blank blank or a less costly blank blank blank - both strategies being options based - would both be suited to a market view that the underlying price was generally expected to break lower prior to the maturity of the option(s).
Assuming the price of the underlying moved as expected, and both strategies were priced using the same σ, a higher profit would be achieved using the blank blank
Solution
A long put or a less costly long put spread - both strategies being options based - would both be suited to a market view that the underlying price was generally expected to break lower prior to the maturity of the option(s).
Assuming the price of the underlying moved as expected, and both strategies were priced using the same σ (volatility), a higher profit would be achieved using the long put.
This is because a long put gives you the right to sell the underlying asset at the strike price, and if the price of the underlying asset falls significantly, the profit potential is much higher. On the other hand, a long put spread involves buying a put and selling another put with a lower strike price, which caps the maximum profit to the difference between the two strike prices.
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