Using options to place a bet on the direction in which you believe the market is likely to move is called:
A)speculation.
B)hedging.
C)a covered position.
D)a naked position.
E)diversification.

Question

Using options to place a bet on the direction in which you believe the market is likely to move is called:
A)speculation.
B)hedging.
C)a covered position.
D)a naked position.
E)diversification.

Quizplus · Accepted Answer

Speculation is the act of betting on the future movement of a market or asset. Options allow investors to speculate on the direction of the market, making it the best choice for this question. Hedging, on the other hand, involves using options to offset potential losses in other investments, while covered positions involve holding both options and the underlying security, and naked positions involve holding options without owning the underlying security. Diversification involves spreading investments across different assets to reduce risk.

Using Options to Place a Bet on the Direction in Which