Using options to reduce risk is called
A)a naked position.
B)speculation.
C)a covered position.
D)hedging.

Question

Using options to reduce risk is called
A)a naked position.
B)speculation.
C)a covered position.
D)hedging.

Quizplus · Accepted Answer

Hedging involves using options to offset potential losses in other positions. This helps to reduce overall risk in a portfolio or investment strategy. A naked position is the opposite of a covered position and involves taking on an uncovered or unhedged position, which can be highly risky. Speculation involves taking on risk in the hopes of making a profit, and may or may not involve the use of options.

Using Options to Reduce Risk Is Called