You are interested in hedging a portfolio of bonds against a rise in interest rates. Which of the following approaches will be most suitable to your goal?
A) Selling deep ITM vanilla call options and buy deep ITM vanilla put options.
B) Selling deep OTM vanilla call options and buy deep OTM vanilla put options.
C) Selling deep ITM cash-or-nothing calls and buy deep OTM cash-or-nothing calls.
D) None of the above.

Question

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The Answer of You are interested in hedging a portfolio of bonds against a rise in interest rates. Which of the following approaches will be most suitable to your goal?
A) Selling deep ITM vanilla call options and buy deep ITM vanilla put options.
B) Selling deep OTM vanilla call options and buy deep OTM vanilla put options.
C) Selling deep ITM cash-or-nothing calls and buy deep OTM cash-or-nothing calls.
D) None of the above.

You Are Interested in Hedging a Portfolio of Bonds Against