
332 Derivatives and Risk Management
C H A P T E R S U M M A R Y
e underlying security can be combined with either call
options or with put options to hedge the risk of investing in
stocks.
Calls with di erent exercise prices or puts with di erent
exercise prices can be combined to make money in the
short run.
Calls and puts can also be combined to make money. e
results of such strategies depend on the expected price
movement of the underlying security.
A covered call means that an investor who owns the
stock writes a call option on the same stock. Covered call
writing is undertaken w ...