Put Options Are Typically Used to Hedge When Portfolio Managers

question 21

Multiple Choice

Put options are typically used to hedge when portfolio managers are mainly concerned about

• A)a permanent decline in a stock's value.
• B)a permanent increase in a stock's value.
• C)a temporary decline in a stock's value.
• D)a temporary increase in a stock's value.

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Definitions:

Cognitive

Relating to mental processes such as perception, memory, thought, and problem-solving.

Physical Changes

Alterations in the form, appearance, or state of a substance that do not change its chemical composition.

Compulsion

A repetitive and seemingly purposeful behavior performed in response to an obsession or according to rules that must be rigidly followed.

Ritualized Behaviors

Actions performed in a prescribed manner that are often symbolic and are part of a larger cultural or religious practice.