A Trader Uses a Stop-Loss Strategy to Hedge a Short

question 4

Multiple Choice

A trader uses a stop-loss strategy to hedge a short position in a three-month call option with a strike price of 0.7000 on an exchange rate.The current exchange rate is 0.6950 and value of the option is 0.1.The trader covers the option when the exchange rate reaches 0.7005 and uncovers (i.e.,assumes a naked position) if the exchange rate falls to 0.6995.Which of the following is NOT true?

• A) The exchange rate trading might cost nothing so that the trader gains 0.1 for each option sold
• B) The exchange rate trading might cost considerably more than 0.1 for each option sold so that the trader loses money
• C) The present value of the gain or loss from the exchange rate trading should be about 0.1 on average for each option sold
• D) The hedge works reasonably well

Understand methods to mitigate historical threats to internal validity in time-series designs.

Understand the significance of treatment intervention points in time-series designs.

Recognize the importance of random assignment in experimental designs to control threats to internal validity.

Understand the limitations of designs lacking comparison groups, random assignment, or control groups and their effect on internal validity.

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Definitions:

Mass-mediated Communication

The transmission of information and messages to a large audience through the use of mass media channels.

Face-to-face

Direct interaction between people in the same physical space, often used to describe in-person meetings.

Politics

The activities associated with the governance of a country or area, especially the debate between parties having power.

Sociological Perspective

A viewpoint in sociology that involves looking beyond individual experiences to understand broader social forces and structures.