Question
Stock market around the world is affected by COVID-19 pandemic. As an experienced investor you decide to take the advantage of it. Currently the stock
Stock market around the world is affected by COVID-19 pandemic. As an experienced investor you decide to take the advantage of it. Currently the stock of ABC Ltd. is selling for $40 per share, which was trading at $45 one week earlier and you are certain that the price will fall further. To take the advantage of this downward price momentum you sell short 1000 share of ABC Ltd at the current market price. You want to make $5000 profit from this short selling. You place an order with your broker to purchase the shares at a certain price to cover the position. What type of order did you place with your broker and at what price? Explain why. (5 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started