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What Is a Derivative Instrument That Allows an Investor to Profit from a Reduction in Stock Supply?

A call option; the reduction in supply typically increases the stock price, making the right to buy at a lower strike price more valuable.
Greeks.Live23.11.25

What Is a Derivative Instrument That Allows an Investor to Profit from a Reduction in Stock Supply?

A call option is the most direct derivative instrument. A stock buyback, by reducing supply and increasing EPS, typically drives the stock price up.

An investor holding a call option has the right to buy the stock at a set price (strike price). If the buyback causes the market price to rise above the strike price, the call option increases in value, allowing the investor to profit.

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