Assume you hold a well balanced portfolio of common stocks Under what conditions might you want to use a stock index (or ETF) option to hedge the portfolio a Briefly explain how such options could be used to hedge a portfolio against a drop in the market b Discuss what happens if the market does, i...

a A stockindex option is a put or a call written on a specific market index When the ...

Assume you hold a well-balanced portfolio of common stocks. Under what conditions might you want to use

Question:

Assume you hold a well-balanced of common stocks. Under what conditions might you want to use a stock-index (or ETF) option to hedge the Briefly explain how such options could be used to hedge a against a drop in the market.
b. Discuss what happens if the market does, in fact, go down.
c. What happens if the market goes up instead?
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...