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Assume you hold a well-balanced portfolio of common stocks

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Assume you hold a well-balanced portfolio of common stocks. Under what conditions might you want to use a stock-index (or EFT) option to hedge the portfolio?

a. Briefly explain how such options could be used the hedge a portfolio against a drop in the market.

b. Discuss what happens if the market does, in fact, go down.

c. What happens if the market goes up instead?

Reference no: EM13569575

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