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Methods to Create a Risk Free Portfolio

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Determine two to three (2-3) methods of using stocks and options to create a risk-free hedge portfolio. Support your answer with examples of these methods being used to create a risk-free hedge portfolio.

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The response provides you a structured explanation of how to create risk free portfolio using options and hedging . It also gives you the relevant references.

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The first method of using stocks and options to create a risk-free hedge is a covered call. In this a call option is written against an existing stock position on a share for share basis. The call is covered by the ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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