If the Hedge Ratio for a Call Option Is 0

question 14

Multiple Choice

If the hedge ratio for a call option is 0.4 and you are short 100 shares of the underlying stock, which of the following actions would result in a risk-free hedge?

• A)Buy 400 calls on the stock.
• B)Buy 40 calls on the stock.
• C)Buy 250 calls on the stock.
• D)Sell 400 calls on the stock.

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Definitions:

Pt

An abbreviation for "patient," the individual receiving medical care or assessment.

C

A general-purpose programming language that provides constructs that map efficiently to typical machine instructions.

Metric Unit

A standard unit of measure in the International System of Units (SI), used globally for scientific and standard measurements.

Micro-

A prefix denoting a factor of one millionth, or pertaining to small, often microscopic, phenomena.