Justin Owns 400 Shares of ORNG Stock Which He Bought

question 67

Multiple Choice

Justin owns 400 shares of ORNG stock which he bought 10 months ago at $20 per share and has now risen to $35 per share. He is afraid the stock price will fall before he has owned it for a full year, but wants to postpone realizing profits on the stock for several months, when it will become a long-term rather than short-term gain. He can protect his profit and avoid the short- term capital gains rate by

• A) writing covered calls.
• B) writing puts.
• C) buying puts.
• D) buying calls.

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Definitions:

Finance Operations

Activities related to managing an organization's money, including income and expenses, to maximize profits and ensure sustainability.

Capital Structure

The mix of a company's debt and equity financing, reflecting how a business is funded.

Debt

An amount of money borrowed by one party from another, often with the condition of repayment with interest over a specified period.

Equity

The ownership value held in assets after all debts and liabilities have been subtracted, often referred to as shareholder's equity in a corporation.