If You Feel Strongly That a Stock Price Will Move

question 42

Multiple Choice

If you feel strongly that a stock price will move a lot,but are unsure of the direction,you could:

• A) buy both a put and a call.
• B) sell both a put and a call.
• C) buy a put and sell a call.
• D) buy two puts.

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Definitions:

Sensitivity of EPS

The degree to which a company's earnings per share (EPS) is affected by fluctuations in its operating income.

ROE

A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Target Capital Structure

The optimal mix of debt, preferred stock, and common equity that a company aims to maintain for financing its operations.

Debt-equity Ratio

A gauge of how shareholders' equity and debt proportionately finance a company’s assets.