Option Hedge (3 graphs)
A partially or fully price-hedged position in which the investor sells more than one risk offsetting option against each corresponding underlying unit. The net effect of this position is to maximize the option seller's profit when the underlying sells at the strike price at expiration. The rate of return at expiration declines if the shares sell either above or below the strike price. The writer loses money only if the stock rises or falls beyond a break-even point at expiration. Also called Ratio Write, Variable Hedge, Hedge. See also Covered Writer, Time Hedge, Reverse Option Hedge, Naked Option.
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