Answer Happy

The outcome of the takeover is uncertain, and we can expect a
big move in the price of Company B’s stock by the time the result
of the takeover attempt is known. A straddle would therefore appear
to be a good trade. However, because knowledge of the takeover is
in the public domain, the prices of calls and puts will be higher
than usual to reflect the fact that a big move in the stock price
is likely. This emphasizes the point that having the same view as
the rest of the market is not usually sufficient to make money
trading options. It is necessary to take a view that is different
from the market consensus