Determine maximum loss risk

Assignment Help Finance Basics

Reference no: EM1344518

John has just started investing, and one of his friends was mentioning how he could use short selling as an effective method to drive up his returns when the market started to go down. John decides that this idea is worth a try and decides to sell 100 shares of Stock A for $125 per share.

-What is John's maximum loss risk here, given this situation?
-Suppose Stock A's stock price appreciated to $135. What would his loss or gain be on this short sale at that point, if he placed a stop-buy to close the short sale?
-If John placed a stop-buy order when he made the original purchase for $130 a share, what would his maximum loss risk be in that case?
-What strategy would you use if you were just getting into short selling to avoid taking a big loss?

Reference no: EM1344518

Questions Cloud

Function of the amount of debt : Plot the value of Progressive, with and without the costs of financial distress, as a function of the amount of debt. Why do the lines differ in shape?

Carrying value-earnings for available-for-sale : Presented below are 3 unrelated situations involving equity securities: What is the effect upon carrying value and earnings for each of the situations above?

Elucidate why might an economist be skeptical of billy : Elucidate why might an economist be skeptical of Billy's discrimination complaint. Billy works for the local piano-moving company part-time after school.

What is the ima of the jack : A child of mass 24 kg sits 2.10m to the left of the center of a seesaw. The mass of the seesaw is 35 kg. How far to the right of the central pivot must a second child of mass 40 kg sit if the seesaw is to be perfectly balanced.

Determine maximum loss risk : John has just begun investing, & one of his friends was mentioning how he could use short selling as an effective method to drive up his returns when market started to go down.

Compute the change in volume : A man pushes on a piano with mass 200 {rm kg} so that it slides at constant velocity down a ramp that is inclined at 18.3^circ above the horizontal floor. Ignore any friction acting on the piano.

Question on securities and exchange commission : What is the Securities and Exchange Commission? How does it affect financial decision-making? What constraints might it put on the company?

Elucidate why an increase in one firm output tends : Elucidate why an increase in one firm's output tends to deter production by the other.

What is the rotational kinetic energy : Two charged spheres are 15 cm apart. They are moved, and the force on each of them is found to have been quadrupled. How far apart are they now.

User Account

All Pages