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Chapter 6. Alternatives to Stock Purchase > Rescue Strategy Using Calls

Rescue Strategy Using Calls

Let's say you sell a put as part of your contingent-purchase strategy and the put is exercised. It creates a paper loss. What can you do to recover in this situation?

The solution depends on the point value of the net loss. In the preceding example, we showed how the Federal Express put exercise would not create a net loss if the stock's market value was between $75 and $80 per share. However, what if market value declined below that level?


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