Question

Which statement is TRUE about the use of index option strategies by managers of pension plans subject to ERISA requirements?

a. Index option trades are permitted without restriction
b. Index option trades are permitted only if the options are broad based and exchange traded
c. Index option trades are permitted only if such transactions conform with the objectives stated in the plan document
d. Index option trades are prohibited under ERISA legislation D

Answer 1

Answer:

Answer is option C.

Explanation:

Under ERISA legislation, there is no restrictions on the trading options of different retirement plans. However, in many cases before any of these wish to get engaged in option trade, they are required to adopt to the policy mentioned in the plan. It is common with the index option that engages in large pension plans to follow the mentioned policy.