The hedge ratio determines
A)the number of call options to offset movements in the price of the stock
B)the number of call options to offset a straddle
C)the number of put options to offset movements in the price of a call option
D)the number of call options to offset the impact of changes in interest rates

Question

Quizplus · Accepted Answer

The hedge ratio is used to determine the number of options needed to offset or hedge against movements in the price of the underlying asset. Specifically, for call options, it helps in determining how many call options are needed to hedge against movements in the stock price.

The Hedge Ratio Determines