Using an option to reduce the risk of a portfolio is called ________, while using options to bet on the direction of the market or an asset is called ________.
A)verification, hedging
B)speculation, hedging
C)hedging, verification
D)hedging, speculation

Question

Quizplus · Accepted Answer

Using options to reduce the risk of a portfolio is called hedging, while using options to bet on the direction of the market or an asset is called speculation. Therefore, the best choice is D- hedging, speculation.

Using an Option to Reduce the Risk of a Portfolio