An investor establishes the following:
Short 700 ONST at 39.20
Short 7 ONST May 37.50 puts at 2.90
Which of the following are not false?
I. The investor has the potential for an unlimited gain
II. The investor’s potential loss exceeds their potential gain
III. The Investor is bearish
IV. The investor is fully hedged
A. I and IV
B. II and IV
C. II and III
D. III and IV
Correct Answer(s):
C. II and III
Explanation:
The investor is short stock and short puts so their potential loss far exceeds their potential gain. The investor is bearish and wants the stock to go down. The other statements are false.
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