AS2114

• • Long Position Hedge:
  • Use put options or sell futures to limit downside risk.
  • Protects against falling prices.
• • Short Position Hedge:
  • Use call options or buy futures to cap losses if prices rise.
  • Locks in a price ceiling.
• • Futures Contracts:
  • Long futures protect against price increases.
  • Short futures protect against price decreases.
  • Locks in future prices, shielding from adverse movements.
• • Option Writing Risks:
  • Call Writers: Unlimited loss if prices rise.
  • Put Writers: Loss is capped at the strike price.