Series 7 practice questioneasyOptions — Protective Put
An investor who owns stock and buys a put option on that stock has established which strategy?
- AA covered call
- BA short straddle
- CA bear spread
- DA protective put (married put)✓ Correct answer
Explanation
Why D — A protective put (married put)
A protective put (also called a married put) involves owning the underlying stock and buying a put option. This strategy protects the investor against a decline in the stock price below the put's strike price, similar to an insurance policy on the stock position.
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