A put option can be used to hedge against:
A) An increase in the price of the underlying instrument.
B) A decrease in the price of the underlying instrument.
C) A decrease in interest rates.
D) All of the above.
E) None of the above.

Question

Quizplus · Accepted Answer

A put option gives the holder the right to sell an asset at a specified price. It is used to hedge against a decrease in the price of the underlying instrument, as it allows the holder to sell at the predetermined price, potentially limiting losses.

A Put Option Can Be Used to Hedge Against