Which one of the following actions would be the most appropriate hedge to a short sale of common stock?
A) sale of a call
B) purchase of a call
C) sale of a put
D) purchase of a put

Question

Quizplus · Accepted Answer

Purchasing a call option is the most appropriate hedge for a short sale of common stock because it gives the investor the right to buy the stock at a specified price, thus capping the potential loss if the stock price rises.

Which One of the Following Actions Would Be the Most