Why would an investor want to use index options to hedge a portfolio of common stock? Could the same objective be obtained using options on ETFs? If the investor thinks the market is in for a fall, why not just sell the stock?
Answer to relevant QuestionsWhat are LEAPS? Why would an investor want to use a LEAPS option rather than a regular listed option? Why do put and call options have expiration dates? Is there a market for options that have passed their expiration dates? 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 ...A 6-month call option contract on 100 shares of Home Depot common stock with a strike price of $60 can be purchased for $600. Assuming that the market price of Home Depot stock rises to $75 per share by the expiration date ...Describe a currency future and contrast it with an interest-rate future. What is a stock-index future, and how can it be used by investors?
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