Chapter 05 · Section 5.1

Fixed Hedge

A hedger can protect a short spot position by establishing a fixed hedge with:

• a) A long call options position.
  Yes. By buying a call option, the hedger with a short position is, through the exercise price, guaranteed a price at which he can buy the short asset. He has turned his unlimited loss potential into a limited one whose size depends on the exercise price. Continue
  b) A long put options position.

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