A hedge ratio of 0.85 implies that a hedged portfolio should consist of
A)long 0.85 calls for each short stock.
B)short 0.85 calls for each long stock.
C)long 0.85 shares for each short call.
D)long 0.85 shares for each long call.
E)none of the above.

Question

Quizplus · Accepted Answer

A hedge ratio of 0.85 means that for each short call, you should hold 0.85 shares of the underlying stock to hedge the position effectively.

A Hedge Ratio of 0