Justin Owns 400 Shares of ORNG Stock Which He Bought

question 67

Multiple Choice

Justin owns 400 shares of ORNG stock which he bought 10 months ago at $20 per share and has now risen to $35 per share. He is afraid the stock price will fall before he has owned it for a full year, but wants to postpone realizing profits on the stock for several months, when it will become a long-term rather than short-term gain. He can protect his profit and avoid the short- term capital gains rate by

• A) writing covered calls.
• B) writing puts.
• C) buying puts.
• D) buying calls.

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Definitions:

Expense Accounts

Accounts used in accounting to track money spent or costs incurred in a company's operations to generate revenue, typically categorized by the nature of the expenses.

Liability Accounts

Accounts that represent amounts owed to others, including loans, accounts payable, and mortgages.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, recognizing the consumption, wear and tear, or obsolescence of physical or fixed assets used in operations.

Tax Return

A form filed with a government body declaring liability for taxation, containing details of income earned and taxes owed.