Your brokerage account is not approved for option trading

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Reference no: EM131452396

"Based on your evaluation of Chipotle, a similar company to El Pollo Loco, you feel strongly that El Pollo Loco stock will rise by 6% over the next 12 months (although you are not sure exactly when this will occur). You want to purchase 1000 shares, but your current cash balance only allows for 700 shares. Your broker charges 7.5% in interest for a margin loan. Your brokerage account is not approved for option trading. What is your best strategy for purchasing 1000 shares? (Just describe a transaction- don’t attempt the math)"

The answer the professor put to this question was "Buy El Pollo Loco shares, short Chipotle"...could someone please explain how they got to that conclusion, I thought since they were not approved for options trading they could not short a stocks?

Reference no: EM131452396

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