A protective put buying strategy can be used to reduce the risk exposure of a stock portfolio to a decline in stock prices, guaranteeing a maximum price equal to the strike price plus the cost of buying the put option.

Question

Quizplus · Accepted Answer

A protective put strategy does indeed reduce the risk exposure of a stock portfolio to a decline in stock prices, but it guarantees a minimum selling price equal to the strike price minus the cost of buying the put option, not a maximum price.

A Protective Put Buying Strategy Can Be Used to Reduce