You Have Determined That You Need -1,698 Call Options to Hedge

question 20

Multiple Choice

You have determined that you need -1,698 call options to hedge your stock portfolio. What should you do based on this information?

• A) buy 17 call option contracts
• B) buy 1,698 call option contracts
• C) write 17 call option contracts
• D) write 170 call option contracts
• E) write 1,698 call option contracts

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Definitions:

Return on Equity

A gauge of a business's earnings effectiveness, demonstrating the profitability produced per dollar invested by shareholders.

Return on Total Assets

A financial ratio that measures a company's ability to generate earnings from its assets.

Gross Margin Percentage

A financial metric used to assess a company's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold.

Net Profit Margin Percentage

A financial ratio that shows the percentage of net income derived from total revenue, emphasizing the profitability of a company after all expenses have been deducted.