Question

You own $75,000 worth of stocks, and you are worried the price may fall by year end in 6 months. You are considering using either puts or calls to hedge the position. Given this, which of the following statements is (are) correct?I. one way to hedge your position would be to buy putsII. one way to hedge your position would be to write callsIII. if major stock price declines are likely, hedging with puts is probably better than hedging with short callsA. I onlyB. II onlyC. I and II onlyD. I, II, and III

Answer 1

Answer:

Answer is D. I, II, and III

Refer below.

Explanation:

You own $75,000 worth of stocks, and you are worried the price may fall by year end in 6 months. You are considering using either puts or calls to hedge the position. Given this, the following statements are correct:

I, II, and III

Answer 2

Answer:

The correct answer is D. I, II. and III

Explanation:

From the question given,

we say that  All the three options are right or correct  We can go for either to  write calls or buy puts and in case there are more probability of vital decreasing  in prices of stock then it is better to hedger with puts rather than hedger with short calls.