Using an Option to Reduce the Risk of a Portfolio

question 80

Multiple Choice

Using an option to reduce the risk of a portfolio is called ________, while using options to bet on the direction of the market or an asset is called ________.

• A) hedging, speculation
• B) hedging, verification
• C) verification, hedging
• D) speculation, hedging

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Definitions:

Deionized Water

Water from which ions have been removed, making it highly pure.

Amylase

An enzyme produced primarily in the pancreas and salivary glands that helps in the breakdown of carbohydrates into sugars.

Pepsinogen

Pepsinogen is an inactive precursor of pepsin, a digestive enzyme produced in the stomach that is activated by stomach acid to break down proteins in food.

Hydrochloric Acid

A strong, corrosive acid consisting of hydrogen and chlorine, notably present in gastric juice.