The COVID-19 Pandemic has resulted in country wide lockdowns and non-essential business closures all around the world. The stock market index has responded to the coronavirus fears with large drops. As of March 17, the S&P 500 fell nearly 30% compared to its record peak set less than a month ago. Though the stock market index has responded to unprecedented shock with large drops, not all industries/companies are impacted to the same extent. For instance, essential businesses such as the supermarkets have also seen a temporary boost in sales from "panic buying". As Bloomberg reported, one New Zealand-based 'supermarket chain said it sold enough food in a single day to feed 10 million people. You are a hedge fund manager, one of your clients overheard that option contracts may an nsurance to the investments and asks your opinions about this.
The COVID-19 Pandemic has resulted in country wide lockdowns and non-essential business closures all around the world. The stock market index has responded to the coronavirus fears with large drops. As of March 17, the S&P 500 fell nearly 30% compared to its record peak set less than a month ago. Though the stock market index has responded to unprecedented shock with large drops, not all industries/companies are impacted to the same extent. For instance, essential businesses such as the supermarkets have also seen a temporary boost in sales from "panic buying". As Bloomberg reported, one New Zealand-based 'supermarket chain said it sold enough food in a single day to feed 10 million people. You are a hedge fund manager, one of your clients overheard that option contracts may an nsurance to the investments and asks your opinions about this.
Business Its Legal Ethical & Global Environment
10th Edition
ISBN:9781305224414
Author:JENNINGS
Publisher:JENNINGS
Chapter19: Governance And Regulation
Section: Chapter Questions
Problem 6QAP
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Explain to your client how option contract can be used as protection against a fall in stock price.
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