Multiple Choice 2 points
strategy means you buy the stock with the anticipation that it will increase in market value, and once it does you will sell it to realize a profit.
Long and short
Tall only
Short only
Long only
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Answer (1)
The strategy described in the question is called a 'Long only' strategy. In investing, going 'long' on a stock means buying shares with the expectation that the stock's price will rise over time. Investors who go long believe that the stock's value will increase in the future, allowing them to sell the stock at a higher price than they paid, thereby realizing a profit.
To break this down:
What does it mean to buy a stock?
Buying a stock means purchasing shares of a company, making you a part owner of that company.
What is a 'long' strategy?
A 'long' strategy involves holding onto stock with the hope that its market value appreciates over time.
Why use a long strategy?
Investors use a long strategy when they are optimistic about a company's future growth and believe that its stock will perform well in the market.
How does profit realization occur?
Once the stock's market price increases, the investor can sell the stock. The difference between the selling price and the purchase price, after accounting for transaction costs, is the profit.
Thus, in this context, the correct choice is 'Long only.'
