SIE practice questioneasyProtective puts
Buying a put option while owning the underlying stock is typically done to:
- AIncrease potential capital gain
- BProtect against a decline in the stock price✓ Correct answer
- CIncrease dividend income
- DReduce taxes owed
Explanation
Why B — Protect against a decline in the stock price
A protective put acts as insurance against a price drop. The other answers do not reflect the protective nature of the strategy.
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