SIE Exam Practice Question 148
Question: 148
An investor has sold short 275 shares of stock PPG at $26 per share. The market currently has PPG trading at $11 per share. The investor sees news of the company that may indicate a price increase over the short term. Which of the following would provide this investor with guaranteed protection against missing a purchase of PPG at a level at which he or she can still make a profit given the short position?
Correct Answer: A
Explanation:
A buy 275 PPG at $21 stop order will allow this investor to pay no more than $21 per share in filling the short position, which has a sell price of $26 per share. A profit will still be made. Conversely, a buy 275 PPG at $32 stop order will enable their order to go as high as $32 a share before being executed, thus potentially eliminating a profit being made by this investor on the short position.
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