Option Hedge Strategies: Rapid Fire

What this video covers

• Which option matches which hedger, and why a seller (short hedger, long the cash, long the basis) buys a put while a buyer (long hedger, short the cash, short the basis) buys a call
• How to calculate the effective floor for a long put: strike price minus premium paid, and why the premium is subtracted as a real upfront cost
• How to calculate the effective ceiling for a long call: strike price plus premium paid, and why the premium is added as an extra cost on top of the physical
• Why the maximum loss on either hedging option is strictly the premium paid, and what that means for risk management
• The structural difference between a futures hedge (zero premium, locks price both ways, surrenders favorable moves) and an option hedge (costs premium, protects only adverse direction, keeps favorable moves)
• Why an option expiring worthless is the good outcome, not a loss to fear, since it means the market moved favorably and the hedger captured that better price
• The four classic Series 3 trap answers: backwards pairing, flipped signs, treating options as no-cost, and fearing worthless expiration