By taking an appropriate position in a suitable stock index option, an institutional investor can create a protective call for a diversified portfolio.

Question

Quizplus · Accepted Answer

A protective call strategy involves buying a call option to hedge against potential losses in a stock position, but the correct term for creating a hedge for a diversified portfolio using options is a "protective put," where the investor buys put options to protect against potential downside.

By Taking an Appropriate Position in a Suitable Stock Index