Explanation:
A long put option gives the holder the right, but not the obligation, to sell the underlying asset at the specified strike price before or on the expiration date. Entering a long put option with a strike price of $29 will give Suzy the right to sell her shares at $29 even if the market price drops below that level, effectively hedging her downside risk.
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Q.85 Suzy Wong, a finance student at the University of Tokyo, regularly invests her extra income in stocks and derivatives. She owns stocks of Safe Home Cleaning Inc., which is currently trading at USD29. She believes the stock will trade below USD29 if new regulations on cleaning companies are introduced next month. If she is interested in entering in an option position that gives her the right to sell her stocks at USD29 if the price of the stock goes below $29, then suggest the most appropriate option position for Wong.
A
Long call option with the strike price of $29
B
Short call option with the strike price of $29
C
Long put option with the strike price of $29
D
Short put option with the strike price of $29
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