According to an article in the Wall Street Journal: “Fund managers tend to bid up options when they expect more erratic currency movements, and sell them when the outlook is calm.”

a. What does it mean to say that fund managers “bid up options”?

b. Why would fund managers be more likely to bid up options when they believe that exchange rates are likely to be erratic?

c. If this characterization of the actions of fund managers is correct, are they buying options primarily to hedge or primarily to speculate?
Briefly explain.