A hedge ratio for a call is always
A)equal to one.
B)greater than one.
C)between zero and one.
D)between negative one and zero.

Question

Quizplus · Accepted Answer

A hedge ratio for a call, which is the ratio of options contracts to underlying assets, is always between zero and one. It represents the exposure of the call option to the underlying asset and the amount of protection needed. A hedge ratio greater than one would imply an over-hedging of the position, while a hedge ratio of one would result in a complete offset of the option position with the underlying asset. A negative hedge ratio would indicate a short position in the underlying asset, which is not applicable for a call option.

A Hedge Ratio for a Call Is Always