Roshivee wants to invest in the share of blue chip companies. However, due to the expected outbreak of war between two countries, an investment advisor suggested him to invest through option contract. He expects that the

Option Contract Choice for Roshivee: Roshivee's investment advisor suggests using an option contract because Roshivee expects the price of shares to go down in the near future due to the expected outbreak of war. When an investor anticipates a downward movement in the price of an underlying asset, the appropriate option strategy is to buy a Put Option . Reason: A Put Option gives the holder the right, but not the obligation, to sell a specified quantity of the underlying asset at a predetermined price (strike price) on or before a specific date. If the share price indeed goes down (falls below the strike price), Roshivee can exercise the put option, sell the shares at the higher strike price, and profit from the difference between the strike price and the lower market price. If the share price does not go down or even increases, Roshivee can simply let the option expire unexercised, limiting the loss to the premium paid for the put option. Therefore, to protect against a downward movement of share prices and to profit from a bearish outlook, Roshivee should buy a put option .