An investor who is considering hedging by selling Treasury futures can also hedge by
A) buying Treasury put options.
B) selling Treasury put options.
C) buying Treasury call options.
D) buying European Treasury options.

Question

Quizplus · Accepted Answer

Selling Treasury futures and buying Treasury put options are two ways to hedge against potential losses in Treasury securities. By buying put options, an investor has the right, but not the obligation, to sell the underlying Treasury security at a predetermined price (strike price) at or before the expiration date of the option. This provides downside protection to the investor. Selling Treasury call options or European Treasury options would not provide the necessary downside protection in a hedging strategy.

An Investor Who Is Considering Hedging by Selling Treasury Futures