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A customer believes ABC's stock price will rise, but she does not currently have the money to buy 100 shares. How could the customer use options to profit from a rise in the stock's price

1 Answer

4 votes

Answer:

The customer could buy call options and sell put options.

Step-by-step explanation:

A call option gives you the right to buy a stock at a certain price. If the price of a stock rises (as the investor believes), the call option can be exercised and a profit will be made.

A put option gives you gives you the right to sell at a certain price. If the price of a stock rises (as the investor believes), the put option will not be exercised since the sales price will be lower than the market price.

User Sherif Ahmed
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