Options Trading

Hedging Recap

Test your knowledge of hedging strategies and risk management. Select the best answer for each question.

You hold 500 shares of AAPL at $180. Which hedging strategy provides complete downside protection?

Sell 5 covered calls at $185 Buy 5 protective puts at $175 Buy 5 calls at $185 Sell 5 naked puts at $175

Your portfolio delta is +300. How many SPY puts (delta -0.4 each) should you buy to achieve delta neutrality?

750 puts 300 puts 400 puts 1200 puts

Which strategy is most cost-effective for hedging a long stock position?

Buy ATM protective puts Create a zero-cost collar (sell call, buy put) Buy two ATM puts per 100 shares Sell deep ITM covered calls

Your position has positive gamma exposure. Which market condition poses the biggest risk?

High volatility Low volatility with small price movements Large price swings Rising interest rates

TSLA earnings are tomorrow. Your position has high negative vega. What's the best hedge?

Buy more TSLA stock Buy long-dated options with positive vega Sell short-dated options Do nothing, vega risk is minimal

You're running a delta-neutral strategy that's losing money in both up and down markets. What's likely the issue?

Negative theta decay Poor delta hedging Negative gamma exposure High vega risk

Which hedging approach requires the most frequent adjustments?

Protective puts Covered calls Delta hedging Option collars

Your portfolio is long 1000 shares of META and short 10 ATM calls. What's your position's gamma exposure?

Positive gamma Negative gamma Neutral gamma Cannot be determined