SIE Exam Question 933: Answer and Explanation

Question: 933

Which of the following options will put an investor at the greatest risk?

• A. Buying a put while not owning the stock.
• B. Buying a put while owning the stock.
• C. Selling a stock short while not owning the stock.
• D. Selling a stock short while owning the stock.

Correct Answer: C

Explanation:

Selling a stock short without already owning the stock would put an investor at the greatest risk. If the stock increases in value, the investor would have to repurchase the stock on the open market. However, if the investor already owned the stock, she would benefit from the shares appreciating in value.