If an individual owns a portfolio of common stocks and wants to hedge the portfolio, that investor may sell a stock index call option.

Name: If an individual owns a portfolio of common stocks and wants to hedge the portfolio, that investor may sell a stock index call option.
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Question

If an individual owns a portfolio of common stocks and wants to hedge the portfolio, that investor may sell a stock index call option.​

Quizplus · Accepted Answer

Selling a stock index call option allows the investor to receive a premium and earn a profit if the market stays neutral or decreases, thus providing a hedge against potential losses in their stock portfolio.

If an Individual Owns a Portfolio of Common Stocks and Wants