A protective put strategy is
A) a long put plus a long position in the underlying asset.
B) a long put plus a long call on the same underlying asset.
C) a long call plus a short put on the same underlying asset.
D) a long put plus a short call on the same underlying asset.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

A protective put strategy involves buying a put option to protect against potential losses in the underlying asset, while also holding a long position in that asset. This combination allows the investor to enjoy the benefits of asset ownership (like dividends or asset appreciation) while having a safety net (the put option) in case the asset's price falls.

A Protective Put Strategy Is