Ms. Brown sold short 100 shares of common stock at $78 per share. The price has

Question

Ms. Brown sold short 100 shares of common stock at $78 per share. The price has declined to $69. The outlook for the stock is mixed, so she would cover her short position if the stock moves up as much as $1 but hold if it continues down. Ms. Brown should place a? Ms. Brown sold short 100 shares of common stock at $78 per share. The price has declined to $69. The outlook for the stock is mixed, so she would cover her short position if the stock moves up as much as $1 but hold if it continues down. Ms. Brown should place a?

Explanation / Answer

Ms.Brown should place a buy stop order at $70

Reason : this is because she wants to buy the stock when it moves up as $1 therefore she would place a stop order $1 which is higher than the current price $69. Hence ($69 + $ 1) = $70 , she would place buy stop order at $70.

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