If you anticipate a dramatic decline in stock prices, which naked strategy will make you the most profit?
A) long call
B) long put
C) short call
D) short put

Question

If you anticipate a dramatic decline in stock prices, which naked strategy will make you the most profit?
A) long call
B) long put
C) short call
D) short put

Quizplus · Accepted Answer

A long put strategy involves buying put options, which gives the investor the right to sell a stock at a specified price within a certain time frame. If an investor anticipates a dramatic decline in stock prices, buying put options can be highly profitable because the value of the put options increases as the stock price decreases. This allows the investor to sell the stock at a higher price than the current market price, thus capitalizing on the anticipated decline in stock prices.

If You Anticipate a Dramatic Decline in Stock Prices, Which