Question: Section 1 (10 points each) 1. Options can be used either to leverage up and increase portfolio risk, or alternatively to reduce overall portfolio risk.

Section 1 (10 points each) 1. Options can be used either

Section 1 (10 points each) 1. Options can be used either to leverage up and increase portfolio risk, or alternatively to reduce overall portfolio risk. Describe an example of a risk-increasing option strategy. and describe an example of a risk-decreasing option strategy, and briefly explain each. 2. You are a portfolio manager and you are considering buying a large put option on your existing portfolio. Why would you do this and what is the basic trade-off you must consider in your decision whether to do this or not

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