Question

Mr. Saso is currently holding $10,000,000 worth of Exxon mobile stock in his portfolio. In order to hedge his position Mr Saso should

Answer 1

Answer:

B. Write a put option on $10 million worth of Exxon Mobile

Explanation:

In order to hedge or reduce the risk Mr Saso should be writing a put option as it permits to sell the stock at the price i.e. predetermined. In case when there is a drop in price that falls the position so it would not be destroyed and therefore the profits could be made

The other option i.e. c and d are not correct as there is no requirement of call option and also long position

And, the option a is also wrong because in this it considered buying the particular amount not for selling it

Hence, the correct option is B