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Explain a call option and a put option to Amber

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Reference no: EM133052826

Question - Amber Bista owns 50,000 shares of Angelina Corporation. He anticipates a decline in the stock price because of the sudden death of the CEO, and a rise in inflation. But because of rising economic growth and favorable GDP figures, he is not certain of the direction of the company's stock. He wants to use options to hedge his investment risk. Unfortunately, he does not understand options.

i. Explain a call option and a put option to Amber.

ii. Explain the circumstances under which Amber will want to buy each of the options.

Reference no: EM133052826

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