What should Roger consider for limiting potential losses on his Stelco Inc. shares?

When considering how to limit potential losses on existing shares, buying put options on the Stelco stock is an effective strategy. A put option gives the holder the right to sell shares at a predetermined price (the strike price) before a specific expiration date. By purchasing put options, Roger can establish a guaranteed selling price for his shares. If the stock price declines, he can exercise the put option to sell his shares at this protected price, thus minimizing his overall loss.

This strategy allows Roger to maintain ownership of his shares while providing a safety net against significant price drops. It is particularly useful in scenarios where he believes in the long-term potential of the company but wants to protect himself against short-term volatility and potential losses.

The other choices do not offer the same level of protection against losses as buying put options. Selling his shares immediately would realize any losses he currently faces without any chance for recovery. Buying call options would be more appropriate for a bullish strategy, which does not address loss mitigation. Investing in a diversified portfolio can be a strong long-term investment strategy, yet it does not specifically protect against losses for the individual stock in question.