An option that does NOT identifiably hedge an underlying asset is a
A)put option.
B)call option.
C)naked option.
D)futures option.

Question

An option that does NOT identifiably hedge an underlying asset is a
A)put option.
B)call option.
C)naked option.
D)futures option.

Quizplus · Accepted Answer

A naked option is an option contract that is not covered by an offsetting position that would help mitigate the overall risk. Therefore, it is not a hedging strategy but rather a speculative strategy. Put options and call options can be used to hedge an underlying asset, while futures options are used to hedge futures contracts.

An Option That Does NOT Identifiably Hedge an Underlying Asset