An option is the right, but not the obligation, to buy or sell an asset (or contract) at or before some future time (exercise date or expiration date) at an agreed price. The underlying assets is identified in the option contract. Suppose that a potential investor heard that you are studying finance and want you to advise her on the use of options to be used to hedge an underlying asset postion against risk.

Write a brief formal letter to her and advise her about any complexitites associated with the use of options for hedging that she might encounter. Remember to keep the letter short and to the point.