A hedge ratio for a call option is ________, and a hedge ratio for a put option is ______.
A) negative; positive
B) negative; negative
C) positive; negative
D) positive; positive
E) zero; zero

Question

Quizplus · Accepted Answer

The hedge ratio, also known as the option's delta, measures the rate of change of the option price with respect to the price of the underlying asset. For a call option, the hedge ratio is positive, indicating that the call option's price moves in the same direction as the underlying asset's price. For a put option, the hedge ratio is negative, indicating that the put option's price moves in the opposite direction of the underlying asset's price.

A Hedge Ratio for a Call Option Is ________, and a Hedge