Assume an investor is long 100 shares of stock ABC, and the stock is currently trading at $45 per share. The investor wants to form a collar to temporarily hedge the position due to the increase in the market's volatility. The investor should ________100 put options with a strike price of $40 and a premium of $1.5; _______100 call options with a strike price of $50 and a premium of $1.5.

POSSIBLE ANSWERS:

- purchases, purchases

- purchases, writes

- writes, purchases

- writes, writes

Please explain why it is "writes" and not "purchases" and vice versa