You currently own 200 shares of Amazon stock.If you purchase options on this stock to protect against future declines in the price of the stock you are implementing which one of the following?
A) covered call
B) naked call
C) protective put
D) bear spread
E) straddle

Question

You currently own 200 shares of Amazon stock.If you purchase options on this stock to protect against future declines in the price of the stock you are implementing which one of the following?
A) covered call
B) naked call
C) protective put
D) bear spread
E) straddle

Quizplus · Accepted Answer

A protective put is a strategy to protect against future declines in the price of a stock. It involves purchasing a put option on the stock, which gives the owner the right to sell the stock at a specified price (the strike price) before the option expires. In this scenario, the owner of 200 shares of Amazon stock could purchase one put option to cover those shares, providing a level of protection against a potential decline in the stock price. The other choices, covered call, naked call, bear spread, and straddle, are all different option strategies that serve different purposes and do not provide the same type of protection as a protective put.

You Currently Own 200 Shares of Amazon Stock