For a call seller, the only upside is the premium collected from the call sold. The downside loss can be virtually unlimited because as the underlying stock price rises, the call seller’s losses increase”. Do you agree with this statement? Explain your answer.

Security Derivative

a.The only derivative you can use to hedge risk is one with equity as the underlying asset.” Discuss.

b. “For a call seller, the only upside is the premium collected from the call sold. The downside loss can be virtually unlimited because as the underlying stock price rises, the call seller’s losses increase”. Do you agree with this statement? Explain your answer.