Buying vs. Selling Options as a Hedge

What this video covers

• Why buying an option is always a full hedge (you own a right, with a defined maximum loss) and selling an option is always a partial hedge (the premium is a finite cushion)
• How a protective put defends a long stock position, and how a covered call leaves a $17 loss on the table when the stock drops $20 against a $3 premium
• The four core equity pairings: long stock (buy put, sell call) and short stock (buy call, sell put)
• Why yield-based options invert the usual logic, so a long bondholder hedging rising rates buys yield-based calls, not puts
• The currency rule for international trade: receiving foreign currency (exporter) buys puts, paying foreign currency (importer) buys calls
• The exam trigger words: "best protection," "maximum protection," and "full hedge" always point to buying, while "income" and "least expensive hedge" always point to selling
• How to hedge an entire diversified stock portfolio with index puts the same way you would hedge a single long stock position