One Way for an Investor to Protect Themselves When Selling

question 2

Multiple Choice

One way for an investor to protect themselves when selling a stock short is to

• A) not make the sale on margin.
• B) buy an offsetting amount of the same shares coincident with the short sale to perfectly hedge the transaction.
• C) issue a stop buy limit order at a price somewhere above the short sale price.
• D) An investor cannot protect against large losses in a short sale transaction.

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Definitions:

Aggregate Supply Curve

A graphical representation showing the relationship between the total quantity of goods and services that firms in an economy are willing to produce at different price levels.

Price Level

An index or average of the combined prices of goods and services in an economy at a specific time, reflecting the cost of living and inflation.

Real Domestic Output

The total value of all goods and services produced within a country's borders, adjusted for inflation.

Equilibrium

An equilibrium state in the market where supply meets demand, stabilizing prices as a consequence.