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SIE: Options
SIE practice questionmediumProtective puts

A protective put limits losses on a stock to:

  1. APremium paid only
  2. BStrike price plus premium paid
  3. CStrike price minus premium paid✓ Correct answer
  4. DThe current market price
Explanation

Why CStrike price minus premium paid

The loss is the stock’s purchase price minus the strike, plus the premium. The other figures either ignore the put’s protection or misstate calculation.

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