If an individual sells a stock short, that investor is protected from a large increase in the price of the stock by selling a call option.

Question

Quizplus · Accepted Answer

Selling a call option when shorting a stock actually increases the risk because if the stock's price rises significantly, the seller of the call may be forced to buy the stock at the market price to fulfill the option contract, potentially at a much higher price.

If an Individual Sells a Stock Short, That Investor Is