A put option on the S&P 500 Index will best protect a portfolio
A)of 100 shares of IBM stock.
B)of 50 bonds.
C)that corresponds to the S&P 500.
D)of 50 shares of AT&T and 50 shares of Xerox stocks.

Question

Quizplus · Accepted Answer

A put option on the S&P 500 Index will best protect a portfolio that corresponds to the S&P 500 because it provides a hedge against a decline in the overall market, rather than just the performance of individual stocks or bonds. Protecting a specific stock, bonds or a combination of stocks may not be as effective as protecting against a broader market downturn.

A Put Option on the S&P 500 Index Will Best