The investor could also short a stock while buying call options. Shorting the stock occurs when the investor borrows shares from another party and sells it with the obligation of buying it back at a later date.
If the price decreases, then the investor can buy the shares back at a lower price and return it to the party they borrowed it from while letting the call option expire. If the price increases, the investor can exercise the call option, which gives them the ability to buy the shares at a fixed price, which minimizes their losses.
0 Comments