Which Combination of Positions Will Tend to Protect the Owner

question 113

Multiple Choice

Which combination of positions will tend to protect the owner from downside risk?

• A) Buy the stock and buy a call option
• B) Sell the stock and buy a call option
• C) Buy the stock and buy a put option
• D)Buy the stock and sell a put option

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Definitions:

Book Value

The difference between a company's total assets and its total liabilities, as shown in the balance sheet.

Statement of Financial Position

A financial statement detailing a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial health.

Shareholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership interest.

Cash Flow to Stockholders

The amount of cash that a company returns to its shareholders, typically in the form of dividends.