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Call and Put Options in Risk Management

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Provide real life examples of the use of a call option in risk management and a put option in risk management.

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Provide real life examples of the use of a call option in risk management and a put option in risk management.

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A call option allows us to purchase a security at a predetermined price in the future, irrespective of current price of the security at that point of time. For example, let's say that we expect price of a commodity, say cotton, wheat or even precious metal such as Gold or silver to rise in the future. In such a scenario, it will be advisable to purchase a call option by paying a premium to ensure that we will ...

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Sandeep Bardia, MBA
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  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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