The most important benefit of an options contract strategy for a hedger is:Question 4Select one:a.the income paid to the writer of the option.b.risk of loss from unfavourable price movements is limited.c.the premium is kept by the seller of the option.d.the option can be exercised at any time.
Question
The most important benefit of an options contract strategy for a hedger is:Question 4Select one:a.the income paid to the writer of the option.b.risk of loss from unfavourable price movements is limited.c.the premium is kept by the seller of the option.d.the option can be exercised at any time.
Solution
The most important benefit of an options contract strategy for a hedger is:
b. risk of loss from unfavourable price movements is limited.
This is because the main purpose of hedging is to protect against potential losses from unfavorable price movements. An options contract allows the holder to buy or sell an asset at a certain price, providing a kind of insurance against market fluctuations. If the market price moves in an unfavorable direction, the holder can exercise the option and limit their loss.
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