Explain How an Investor Can Use a Share- Index Option

question 64

Essay

Explain how an investor can use a share- index option to hedge a portfolio of common shares.

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Definitions:

Spinal Cord

A long, thin, tubular bundle of nervous tissue and support cells that extends from the brainstem down the back, transmitting neural signals between the brain and the rest of the body.

Sympathetic Nervous System

Part of the autonomic nervous system that activates the body's fight-or-flight response during stressful situations.

Parasympathetic Nervous System

A division of the autonomic nervous system responsible for conserving energy and lowering the heart rate, among other actions, to maintain homeostasis.

Autonomic Nervous System

The part of the nervous system responsible for control of the bodily functions not consciously directed, such as breathing, the heartbeat, and digestive processes.