Understanding Stock Options
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An investor who has sold stock short in anticipation of a price decline can limit apossible loss by purchasing call options. Remember that shorting stock requires amargin account and margin calls may force you to liquidate your position prematurely.Although a call option may be used to offset a short stock positions upside risk, it doesnot protect the option holder against additional margin calls or premature liquidationof the short stock position.Assume you sold short 100 shares of XYZ stock at $40 per share. If you buy an XYZ40 call at a premium of 3 1/2, you establish a maximum share...
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Understanding Stock Options
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Understanding Stock Options
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