Which of the Following Is Not True Regarding Using an Option

question 46

Multiple Choice

Which of the following is not true regarding using an option to hedge financial risks versus a forward contract?

• A)​An option is a right to buy or sell an underlying, while a forward contract is an obligation.
• B)​An option requires an initial cash outlay, while a forward contract does not.
• C)​Both options and forwards are said to have asymmetric or one-sides return profiles.
• D)​All of the above are true.

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Definitions:

Rolling Over

A developmental milestone in infants, usually marked by the ability to independently roll from their stomach to their back and vice versa.

Standing Alone

The act or condition of being independent, not supported or affiliated with others.

Walking

The act of moving at a moderate pace on foot as a means of physical exercise or transportation.

Sucking

An instinctual reflex in infants that facilitates the intake of nourishment from a breast or bottle.