You Have Determined That You Need -1,589 Call Options to Hedge

question 57

Multiple Choice

You have determined that you need -1,589 call options to hedge your stock portfolio.What should you do based on this information?

• A) buy 16 call option contracts
• B) buy 1,589 call option contracts
• C) write 16 call option contracts
• D) write 160 call option contracts
• E) write 1,589 call option contracts

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Definitions:

Habit

A settled or regular tendency or practice, especially one that is hard to give up.

Secondary Circular Reactions

A stage in Piaget's theory of cognitive development where infants repeat actions that are pleasurable or bring about a desirable outcome.

Primary Circular Reactions

Early repetitive behaviors in infants that focus on the body and are instrumental in the development of cognitive processes.

Tertiary Circular Reactions

The stage in Piaget's sensorimotor phase (usually around 12-18 months of age) where infants start experimenting with new behaviors through trial and error.