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Investing Intermediate: Investment Strategies for a Volatile Market

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1.
The main goal of hedging is to _______.
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Reduce volatility by offsetting risk. To achieve this goal, hedging uses a variety of techniques, some of them quite complicated.
2.
Diversifying your portfolio can help you _______.
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Both of the above. Diversifying can help you to lower risk and increase your returns.
3.
Using current shares as collateral to buy more shares is called buying on margin.
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True. Margin-buying involves investing with borrowed money and using one's own shares as collateral.
4.
A put option gives you the right to sell a security at a fixed price.
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True. With a put option, the price is fixed, and you can sell the security at that price.
5.
If you buy a six-month future to buy oil at today's prices and then oil prices fall, you _______.
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Take a loss. If the oil prices fall, you take a loss.
6.
A limit order gives your broker a set price limit at which to buy or sell your security.
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True. A limit order simply limits the price at which the security may be bought or sold.
7.
An investor who sells short does not own the security before he or she sells it.
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True. An investor who sells short borrows the security before he or she sells it.
8.
A straddle's potential loss is limited by _______.
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The difference between the call price and put price. This is how the straddle can protect the investor from volatility.
DONE
Introduction to Investment Strategies for a Volatile Market Diversification in a Volatile Market Tame Volatility with Limit Orders and Stop Orders Hedging to Curb Volatility Buying on Margin for Leverage Selling Short to Take Advantage of a Down Market Using Option Strategies Straddling Uncertainty Capitalize on Future Price Movements Summary of Investment Strategies for a Volatile Market Find out what you learned