You Believe the Price of a Stock Is Going to Decline

question 36

Multiple Choice

You believe the price of a stock is going to decline within the next three months. Which one of the following option payoff profiles will reflect a profit if your belief is correct?

• A)buying a call
• B)selling a call
• C)buying a put
• D)selling a put
• E)none of the above

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Definitions:

Economists

Professionals who study the production, distribution, and consumption of goods and services, and analyze economic issues and behaviors.

Investment

The act of allocating resources, usually money, with the expectation of generating an income or profit, such as purchasing assets or stocks.

Economic Term

A concept or terminology used within the field of economics to describe processes, theories, or phenomena related to how goods and services are produced, distributed, and consumed.

Opportunity Cost

Giving up potential improvements from various alternatives by choosing one option.