A hedge ratio of 0.70 implies that a hedged portfolio should consist of ________.
A) long 0.70 calls for each short stock
B) long 0.70 shares for each long call
C) long 0.70 shares for each short call
D) short 0.70 calls for each long stock

Question

Quizplus · Accepted Answer

A hedge ratio of 0.70 implies that to hedge against a short position in calls, one would need to hold long positions in 0.70 shares for each short call to maintain a balanced exposure. This ratio indicates the proportion of a position that should be hedged to offset risk.

A Hedge Ratio of 0