Question

A client has held a long position in BCD Common for several years and has seen a sizeable increase in price since initially buying the stock. The client fears that BCD is headed for a slight downturn in price and wishes to protect the profits that he holds from the previous increase. Which option strategy provides the MAXIMUM protection for this client?[A] This client would be best suited by buying calls on BCD.
[B] This client would be best suited by selling calls on BCD.
[C] This client would be best suited by buying puts on BCD.
[D] This client would be best suited by selling puts on BCD.

Answer 1

Answer:

C. This client would be best suited by buying puts on BCD

Explanation:

Buying puts on BCD is the best option strategy for protection of the profits