Discuss the Relative Advantages and Disadvantages in Using Either Options

question 57

Essay

Discuss the relative advantages and disadvantages in using either options or futures to hedge an exposure.(For simplicity, assume that the contracts are written on the same quantity of the same asset and that the contracts expire at the same time.Also assume that the strike price and futures price are identical.)

---

Definitions:

Employee Empowerment

A management strategy that gives employees autonomy, authority, and the capacity to make decisions affecting their work.

Deteriorated Customer Relations

A decline in the quality of interactions and satisfaction of customers with a company's products or services, potentially affecting loyalty and revenues.

Lost Sales

Lost Sales refer to potential revenue that was not earned due to stockouts, uncompetitive offerings, or other factors that prevented a transaction with a willing buyer.

Parallel Reliabilities

Measures of the reliability of systems or components arranged in parallel, indicating the overall system's ability to operate effectively even if one component fails.