Using Options for Portfolio Risk Management

Sarah is a portfolio manager who oversees a large equity fund. Recently, she has received inquiries from her clients about the best ways to protect their investments against potential market downturns. To address these concerns, Sarah is considering various risk management techniques, including the use of derivatives.

Among the derivatives available, options have emerged as a popular choice for hedging equity exposure. Sarah is exploring the mechanics of using options to mitigate risk effectively while maintaining growth potential.