A Protective Call is an options strategy used by short-sellers to hedge against the risk of a rising stock price. An investor who has sold a stock short will purchase a call option on the same stock, which gives them the right to buy the shares at a predetermined strike price. If the stock price rises sharply, the call option limits the short-seller's potential losses. This strategy acts as insurance for bearish positions and is used by sophisticated investors who want to maintain short exposure while capping their maximum possible loss.
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