Stock index options can be used to:
A) Protect a portfolio position against an adverse price movement.
B) Bet on the movement of stock prices.
C) Earn an abnormal return.
D) a and b only.
E) All of the above.

Question

Quizplus · Accepted Answer

Stock index options can be used both to protect a portfolio position against an adverse price movement (hedging) and to bet on the movement of stock prices (speculation). Earning an abnormal return is not guaranteed.

Stock Index Options Can Be Used To