Using an option to reduce the risk of a portfolio is called ________,while using options to bet on the direction of the market or an asset is called ________.
A)hedging,speculation
B)hedging,verification
C)verification,hedging
D)speculation,hedging
E)verification,speculation

Question

Quizplus · Accepted Answer

Hedging involves using options to reduce risk in a portfolio, whereas speculation involves using options to bet on the direction of the market or an asset. The other choices do not accurately describe these concepts.

Using an Option to Reduce the Risk of a Portfolio