The correct answer is option C. stop loss order at $40
By placing a stop loss order at $40, the investor protects his profit of $10 per share. If the price drops to $40, the stop loss order gets triggered and the order is executed.
Other answer options are incorrect:
- market order at $60. Market order gets executed immediately. And we cannot specifiy a price in market order.
- limit order at $50. A limit order close to the current price likely to gets executed immediately. If the order gets executed immediately we cannot participate in the upside potential of the stock.
- buy a call options contract with stike at $45. Buying a call option will only increase the downside risk and doesn't protect the profit.
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