SIE practice questionmediumOptions — Protective Put
An investor who owns stock and buys a put option on that stock is using a strategy called a:
- AProtective put (married put)✓ Correct answer
- BCovered call
- CStraddle
- DNaked put
Explanation
Why A — Protective put (married put)
A protective put (also called a married put) involves owning the underlying stock and buying a put option as insurance. The put sets a floor on the maximum loss — the investor can always sell at the strike price regardless of how far the stock falls. The cost is the put premium. This is like buying insurance on a stock position. A covered call (B) involves selling a call while owning stock.
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