Which of the following is a good strategy to adopt when interest rates are expected to rise?
A)Buying a call option on a bond.
B)Writing a call option on a bond.
C)Writing a put option on a bond.
D)Buying bond futures.
E)All of the above.

Question

Quizplus · Accepted Answer

Writing a call option on a bond is a good strategy when interest rates are expected to rise. This allows the investor to earn income from the option premium while limiting the potential downside if bond prices fall due to the rise in interest rates. Buying a call option on a bond or buying bond futures would not necessarily be effective in this situation, and writing a put option on a bond would expose the investor to greater risk if bond prices fall.

Which of the Following Is a Good Strategy to Adopt