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Please plot the diagram of a Long Volatility strategy and list all the basic building blocks of this strategy, paying attention to premium and strike values. When would you want to use this strategy? (40 Marks)

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Payo9fLong Volatility strategy means Investor believes that market is going to move in leaps and bounds in any of the direction but for sure.

One of such strategies is Long Straddle in this strategy investor is not worried about Bull or Bear run of the market he goes long on Call option on that particular stock and Long on Put for the same underlying stock at same maturity & strike price.

We should buy this strategy when there is going to happen an event regarding that stock such as some news of that stock , merger acquisitions etc.

There are other combination of strategies such as Long strangles I will show you the payoff diagram of Long straddle (Long Volatility) strategies they are some times called as non directional strategies

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