You own shares of AZT stock. Which of the following strategies can you use to hedge your risk associated with a price decrease in AZT stock?
I. buy call options
II. write call options
III. buy put options
IV. write put options
A)I only
B)I and III only
C)I and IV only
D)II and III only
E)II and IV only

Question

Quizplus · Accepted Answer

To hedge against a price decrease in AZT stock, you can write call options (II), which allows you to earn premium income that offsets some of the losses from the stock's price decrease. Buying put options (III) gives you the right to sell the stock at a predetermined price, protecting against a drop in the stock's price.

You Own Shares of AZT Stock