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Tina sells short 1,000 shares of XYZ at $10 and immediately buys 10 calls with a strike price of $11.50 at a cost of $0.25.

Tina sells short 1,000 shares of XYZ at $10 and immediately buys 10 calls with a strike price of $11.50 at a cost of $0.25.

  1. What type of account would Tina need to have in order to make this type of trade?
  2. What does Tina believe the shares of XYZ are going to do?
  3. Why does she buy the calls?
  4. Discuss 2 risks of shorting shares.
  5. What is her total profit/loss if XYZ shares hit $12
  6. What is her total profit/loss if XYZ share hit $8

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