Canadian Securities Course (CSC) Practice Exam · Question
An investor purchases a put option. What does this indicate about their market outlook?
Purchasing a put option gives the investor the right to sell the underlying asset at a specified price. This strategy is typically employed when an investor has
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Question: An investor purchases a put option. What does this indicate about their market outlook?
Answer options:
- Bullish (expects the price of the underlying asset to increase) ✅ Bearish (expects the price of the underlying asset to decrease)
- Neutral (expects the price of the underlying asset to remain stable)
- Volatile (expects significant price movement in either direction)
Correct answer: Bearish (expects the price of the underlying asset to decrease)
Explanation: Purchasing a put option gives the investor the right to sell the underlying asset at a specified price. This strategy is typically employed when an investor has a bearish outlook, expecting the asset's price to fall.
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