Chapter 05 · Section 5.1

Hedging Long Positions

A long stock position implies:

• a) a loss potential equivalent to the price paid for the stock;
  No. The loss potiential equivalent to the price paid for the share describes the downside risk. There are also upside possibilities. Another answer is also true.
  b) a loss potential equivalent to the premium of an option on this stock;
  c) unlimited profit potential;
  d) limited profit potential.
  e) a and c
  f) b and d

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