SIE - Securities Industry Essentials Exam

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A hedge fund manager that is long large cap US stocks in the fund's portfolio may hedge his risk by

Selling S&P 500 index calls
A
Buying S&P 500 index puts
B
Buying Russell 2000 index puts
C
Selling Russell 2000 index calls
D

Explanations

The S&P 500 is the broadest measure of the American economy and contains all large cap stock. Buying puts can hedge the long stock fund's risk in its portfolio.

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