Which Combination of Positions Will Protect the Owner from Downside

question 8

Multiple Choice

Which combination of positions will 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:

Parol Evidence Rule

A legal principle in contract law that prevents parties from presenting evidence of prior or contemporaneous agreements that contradict the written terms of a contractual agreement.

Partially Integrated Contract

A written contract that represents some, but not all, of the terms agreed upon by the parties.

Ambiguous Term

A word or phrase that can be understood in more than one way, leading to uncertainty or varying interpretations.

Party to be Charged

The individual or entity against whom legal action is taken or who is required to fulfil an obligation.