Which type of trade gains value when the price of a stock or ETF increases?

• A. Short only trades
• B. Long only trades
• C. Options trades
• D. Market making

Answer: (B)

Long only trades gain value when the price of a stock or ETF increases because these trades involve buying securities with the expectation that their value will rise over time. In a long trade, an investor purchases shares at a certain price and benefits if the price climbs above that purchase price, allowing them to sell at a profit. This method aligns with the fundamental principle of buying low and selling high, making long positions a straightforward strategy for capitalizing on price increases.

In contrast, short trades involve betting against a stock, which profits when the price decreases. Options trades can be complex, as they can either gain or lose value based on different factors, including price movements, but they are not solely based on increasing prices. Market making involves providing liquidity to the market rather than directly profiting from price increases or decreases, making it different from a directional investment strategy.