Heuristics Are Shortcuts in Decision Making That Save Mental Activity

question 49

True/False

Heuristics are shortcuts in decision making that save mental activity.

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Definitions:

Strike Price

The fixed price at which the owner of an option can purchase (call) or sell (put) the underlying asset or security.

Put Option

A financial contract giving the buyer the right, but not the obligation, to sell a specified amount of an asset at a predetermined price within a specific time frame.

Hedge Ratios

A mathematical approach to minimizing risk by determining the optimal proportion of positions needed to offset potential losses.

Long Puts

An option strategy involving the purchase of put options, with the expectation that the underlying asset will decrease in value, allowing the holder to sell at a higher strike price.