Stock index options
1) permit the investor to short the market instead
Of individual stocks
2) require delivery of an index of stocks
3) limit the buyer's potential loss to the cost of
The option
A) 1 and 2
B) 1 and 3
C) 2 and 3
D) all of the above

Question

Quizplus · Accepted Answer

Stock index options allow investors to short the market by buying put options on the index. They do not require delivery of an index of stocks, but instead settle in cash. The potential loss for the buyer is limited to the cost of the option, which provides a form of downside protection.

Stock Index Options 1) Permit the Investor to Short the Market Instead