Why might an investor choose to hedge a stock position instead of simply selling the stock when they anticipate a market decline? Option: Hedging eliminates all market risk, Hedging incurs higher transaction costs, Hedging allows them to benefit from a potential rebound in the stock price, Selling the stock guarantees a profit

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Why might an investor choose to hedge a stock position instead of simply selling the stock when they anticipate a market decline?

Hedging eliminates all market risk

Hedging incurs higher transaction costs

Hedging allows them to benefit from a potential rebound in the stock price

Selling the stock guarantees a profit

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What is the primary benefit of using options contracts when trading in the stock market?

Higher leverage

Limited risk

Tax advantages

Guaranteed profits

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How can intraday traders potentially profit in a bearish market?

"By increasing their trading frequency"

"By investing in bonds instead of stocks"

"By short selling stocks"

"By holding onto stocks for the long term"

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What does 'shorting' a stock involve?

Selling a stock with the expectation it will fall in value

Investing in a diversified portfolio of stocks

Buying a stock with the expectation it will rise in value

Holding a stock long-term for future growth

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What is the primary motivation behind shorting a stock?

To generate income through dividends and interest payments

To profit from an anticipated increase in the stock's price

To gain ownership in a company with strong growth potential

To capitalize on an expected decline in the stock's price

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What is the purpose of calculating the hedge value?

To identify the best stocks to include in the portfolio

To determine the amount of money needed to fully hedge the portfolio

To assess the riskiness of the portfolio

To estimate the potential profit from hedging