Question

You short-sell 200 shares of Rock Creek Fly Fishing Co., now selling for $51 per share....

You short-sell 200 shares of Rock Creek Fly Fishing Co., now selling for $51 per share. If you want to limit your loss to $1,950, you should place a stop-buy order at ___.

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Answer #1

Calculate the stop buy order price as follows:

Maximum loss = (Stop buy price - current selling price)* Number of shares

$1,950 = (Stop buy price - $51)*200

Stop buy price = (1950/200) + $51

= $60.75

Therefore, the stop buy price is $60.75.

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