SIE practice questionmediumProtective puts
A protective put limits losses on a stock to:
- APremium paid only
- BStrike price plus premium paid
- CStock purchase price minus strike price plus premium paid✓ Correct answer
- DThe current market price
Explanation
Why C — Stock purchase price minus strike price plus premium paid
A protective put's maximum loss equals the stock purchase price minus the put strike price, plus the premium paid. The put limits downside below the strike, but the premium is part of the investor's cost.
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