SIE practice questionmediumOptions - Strategies
An investor expects a stock’s price to decline. Which options strategy would best take advantage of this forecast?
- ASell a put
- BBuy a call
- CBuy a put✓ Correct answer
- DSell a call
Explanation
Why C — Buy a put
Buying a put profits if the stock falls, as the option’s value rises. Buying a call profits if the stock rises. Selling a put profits if the price stays the same or rises. Selling calls is a bearish strategy, but with more risk than buying puts.
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