Final answer:
To minimize losses on a short-sell position, a stop-buy order should be used, which closes out the position if the stock price rises to a certain level.
Step-by-step explanation:
When you short-sell a stock at $80 per share, you are betting on the stock's price to go down, so you can buy it back at a lower price. However, the risk is that if the stock price goes up, your losses can theoretically be unlimited. To minimize potential losses, you could use a stop-buy order, also known as a buy-stop order. This type of order is designed to limit an investor's loss on a short sale. If the stock price rises to a certain level, the stop-buy order triggers and the stock is bought back, which closes out the short position and caps the loss.
The losses could be minimized by placing a stop-loss order. A stop-loss order is set by the trader to automatically sell the stock if it reaches a certain price, thus limiting the potential losses. In this case, if the trader sets a stop-loss order at a certain price lower than $80 per share, the stock will be sold automatically if it reaches that price, preventing further losses.