Straddle vs. Combination Identification Criteria
An investor purchases 1 XYZ May 50 Call and simultaneously purchases 1 XYZ May 55 Put. This strategy is classified as a:
A straddle requires IDENTICAL strike prices and expiration dates. When strikes or expirations differ, the position is a combination (strangle).
Complete Analysis & Legal Rationale
Because the call strike ($50) and put strike ($55) are different, this is a combination (specifically a strangle), NOT a straddle.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Different strikes distinguish a combination from a straddle.
Straddles MUST have identical strikes and identical expirations.
This is a two-way volatility position, not a directional bear spread.
Calendar spreads have different expiration months on the same type of option.
Official Standard: Differentiates combinations from straddles for margin and disclosure.