Chapter 04 · Section 4.1
Stop Orders- Call
Take a second look at that stop order:
Buy 3 CBOE BankAm June 15 calls stop-loss 3 1/2
The floor broker should not execute the order as long as the market price of the call option remains below 3 1/2 because:
d) the price is not yet as bad as 3 1/2.
Yes. Because you have a short call position, as the price of the call option increases, so do your losses. You have instructed the broker to stop your exposure to further losses if the price gets as bad as 3 1/2.Continue
a) you want a better price than 3 1/2.
b) you want a lower price than 3 1/2.
c) you want a higher price than 3 1/2.
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