Hedging risk for a short position is accomplished by
A)taking a long position.
B)taking another short position.
C)taking additional long and short positions in equal amounts.
D)taking a neutral position.

Question

Quizplus · Accepted Answer

Hedging risk for a short position is best accomplished by taking a long position in a related security or instrument. This is known as a "long hedge" and can help offset any losses from the short position if the market goes against the trader. Option B is not recommended because taking another short position would increase the overall risk, and option C would have no effect on the original short position. Option D (taking a neutral position) would not provide any protection against potential losses from the short position.

Hedging Risk for a Short Position Is Accomplished by