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If you beleive the price of Disney will go down in the near future and you don't want to risk too much, which one of the following woud be Most SUITABLE?
You can assume you have no other positions (stocks, bonds, options etc) in your brokerage account.
Sell Disney Stock "Short"
Buy Disney Puts
Sell Disney Puts
Buy Disney Calls
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Solved in 2 steps
- What happens if you sell short calls and they become deep in-the-money? A. You risk being assigned to buy the stock. B. Your broker may tell you to immediately cover your short calls. C. You risk assignment any time your short calls are deep in-the-money prior to expiration. D. You can just buy an equal number of puts to cover your short calls.You are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share.a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position?The Initial Margin is $ Blank 1. Fill in the blank, read surrounding text.Please use only accepted characters within numeric response fields..b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position?A margin call will be issued when price is $ Blank 2. Fill in the blank, read surrounding text.or higher.Some speculators think you should buy stock which are heavily shorted. Their reasoning is: a. The more a stock is shorted, the more that needs to be bought to close the short positions. b. The more a stock is shorted, the more speculators will have to sell in the future. c. the crowd is always right.
- You would like to invest in ABC Corporation stocks. According to the stock broker, now is the best time to purchase it. Based on your own intrinsic valuation estimation, the stock is undervalued. A month later, the pandemic broke out and all stocks experienced significant decreases in their value. What should you do?a. File a case against the stock broker for misleading you to purchase the stocks.b. Switch from intrinsic valuation to relative valuation.c. Assume that the market is efficient and simply invest when there is excess cash and sell the investments which there will be large expenses.d. Acknowledge macroeconomic uncertainty and keep a cool but conscious mind about current and future investment plans.You own Honeywell stock, and are worried that its price will fall. You are considering "insuring" yourself against this possibility. How can your provide such protection? (Choose the best answer below.) A. To protect against Honeywell's stock price dropping, you can buy a put with Honeywell as the underlying asset. B. To protect against Honeywell's stock price dropping, you can sell a call with Honeywell as the underlying asset. C. To protect against Honeywell's stock price dropping, you can buy a call with Honeywell as the underlying asset. D. To protect against Honeywell's stock price dropping, you can sell a put with Honeywell as the underlying asset.You are bearish on Telecom and decide to sell short 100 shares at the current market price of $47 per share. Required: a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position? b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position?
- You are trading in a market in which you know there are a few highly skilled traders who are better informed than you are. There are no transaction costs. Each day you randomly choose five stocks to buy and five stocks to sell (by, perhaps, throwing darts at a dartboard).a. Over the long run will your strategy outperform, underperform, or have the same return as a buy and hold strategy of investing in the market portfolio? b. Would your answer to part (a) change if all traders in the market were equally well informed and were equally skilled?A friend of yours owns a company that is about to get a large government contract. He tells you this inside information about the contract and also mentions that it should make the company's stock price increase dramatically. If you invest based on this inside information, then you are implicitly saying that stock markets are inefficient in which context? Question 5 options: weak form efficient market theory semi-strong form efficient market theory strong form efficient market theoryYou are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share.a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position?b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position?
- You are short 1000 shares of XYZ stock and you want to limit losses to the upside should the position go against you. YOu want to use an option positon to control your risk. Which of the strategies below best accomplished your objective? a. covered call b. covered puit c. protective call d. straddle e. none of the aboveYou are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share. How much additional cash must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Enter your answer without the dollar sign How high can the price of the stock go before you get a margin call if the maintenance margin is 25% of the value of the short position? Round your answer to two decimal places and enter it without dollar sign.A rational investor is choosing to invest in either Fakebook stock, which is a tech company, or Abala Land, a real estate company. Both are hypothetical Philippine stocks. Their expected returns are 19% and 15%, and standard deviations of 39% and 30%, respectively. What will he most likely do? Invest in Fakebook stock because it earns more than Abala Land stock. Invest in Abala stock because it has a higher Sharpe ratio of 0.50 compared to Fakebook’s 0.49. Do not invest in Fakebook stock because it has a higher coefficient of variation of 2.05 than Abala Land’s 2.0. Invest in Abala stock, because it is less risky than Fakebook stock.