SIE practice questionmediumProtective puts
If an investor owns 100 shares of XYZ and buys 1 XYZ put option, this strategy is known as:
- ACovered call
- BProtective put✓ Correct answer
- CNaked call
- DShort straddle
Explanation
Why B — Protective put
A protective put hedges downside risk by combining stock ownership with a long put. Covered calls involve selling calls, while the other options are unrelated or incorrect.
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