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:

Fair Market Value

The price at which property would sell on the open market between a willing buyer and a willing seller, both having reasonable knowledge of the relevant facts.

Serious Illness

A health condition that has a significant effect on a person's life activities, potentially requiring medical attention or treatment.

Nursing Home

A residential facility providing care and living accommodations for elderly or disabled individuals requiring constant health care support.

Duress

A situation in which someone performs an act as a result of violence, threat, or other pressure against them, often impacting the legality or validity of agreements made under such conditions.