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"A customer is long 1,000 shares of ABCD stock. It is now September and the customer is worried that the price of ABCD may decline, but does not want to sell the stock until the end of this year. She is very cost-conscious and wants a strategy to protect the stock from a falling market at minimal cost. You should recommend that she:"

Respuesta :

batolisis

Answer:

She should Hedge her stock position by buying 10 ABC Dec puts and sell 10 ABC Dec calls

Explanation:

In order to protect her long position on the stock from a falling market at minimal cost i would recommend she should  buy 10 ABC Dec puts and sell 10 ABC Dec calls i.e hedging her long position on the stock

This way she will protect her self against the falling market that she is worried about