Question

a stockbroker uses a computer program to design trades for clients.
designing a trade with tradersys

1. choose strategy
2. choose expiration date
3. enter dollar amount
4. select

un\
strategies
strategy 1: long position buying shares with the expectation that the market price will rise
strategy 2: short position selling shares with the expectation that the market price will fall
strategy 3: limit order setting a maximum market price to buy, or a minimum market price to sell, shares
strategy 4: stop - loss order setting a specific market price to buy or sell shares
strategy 5: covered call buying shares at a contract price
selecting
un\ results in a listing of all available opportunities. when prompted, select
ext\ to complete your trade.
which strategy allows a client to sell shares before an expected market price fall?
a. 1
b. 2
c. 3
d. 4

Explanation:

To solve this, we analyze each strategy:

• Strategy 1 (Long Position): Buys shares (not sell) expecting price rise. Eliminate A.
• Strategy 2 (Short Position): Sells shares expecting price fall. This matches the question.
• Strategy 3 (Limit Order): Sets price to buy/sell, not specifically for expected fall. Eliminate C.
• Strategy 4 (Stop - Loss Order): Sets price to buy/sell, not about expected fall before. Eliminate D.

Answer:

B. 2