T/F: An advantage of using options to hedge is that the MNC can let the option expire. However, a disadvantage of using options is that a premium must be paid for it

An advantage of using options to hedge is that the MNC can let the option expire. However, a disadvantage of using options is that a premium must be paid for it - True

A financial contract known as an option grants its owner the right, but not the responsibility, to buy or sell the underlying asset at a defined price referred to as the strike price on or before an expiration date. Businesses and investors can utilize options to protect themselves from any risks or losses resulting from price changes in the underlying asset.

The advantage of using options to hedge is that the holder can choose to let the option expire if the underlying asset does not move in the direction that was anticipated. This means that the holder does not have to exercise the option and can simply let it expire if it becomes worthless. However, a disadvantage is that a premium must be paid to acquire the option. The premium represents the cost of obtaining the right to buy or sell the underlying asset at a later date, and it is generally paid upfront when the option is purchased.