Question

A client believes that XYZZY stock has topped out in price and is ready for a steep drop. What recommendation would give the customer the smallest profit if this occurs

Answer 1

Answer: Buy XYZZ stock and sell an XYZZ call

Step-by-step explanation:

Since the buyer seems convinced that XYZZ stock has bottomed its price, he should purchase the stock since it has gotten to its cheapest Point.

And since he believes that XYZZ's price would rebound soon, He should exercise a little patience and not sell at a call option for XYZZ. Because if he attempts to sell at a call option then his earnings becomes very limited, since the price set at the call option would be very low.

My best advice would be for him to hold on to XYZZ stock for a while and allow for its price to rebound.