Managing Market Risk with Options

Samira is a portfolio manager overseeing a diversified investment portfolio that includes equities, fixed income, and alternative investments. Recently, global economic indicators have suggested increasing volatility in the equity markets, primarily due to geopolitical tensions and changing monetary policies. As part of her risk management strategy, Samira is evaluating different methods to protect the portfolio from adverse market movements.

She is particularly concerned about market risk and wants to implement an effective hedge to mitigate potential losses in the equity component of her portfolio. Samira has three potential strategies to consider. Assess the strategies and determine which one is most effective for managing market risk in her equity holdings.