What Is the Advantage of a Futures Hedge Over an Options

question 103

Multiple Choice

What is the advantage of a futures hedge over an options hedge?

• A)The futures hedge has lower credit risk exposure.
• B)The futures hedge reduces volatility in profit gains on both sides.
• C)The futures hedge is marked to market less frequently.
• D)The futures hedge offers the least downside risk protection.
• E)The futures hedge completely offsets losses but only partly offsets gains.

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Definitions:

Employment

The condition of having paid work, or the total number of people who are currently employed or actively looking for work.

Variable Input

Inputs or resources whose quantity can be changed in the short term to adjust the level of production, such as labor or raw materials.

Labor Market

The marketplace in which employers find workers and workers find jobs, characterized by the demand and supply of labor.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a factor of production, holding other factors constant.