A protective put is a costless way of eliminating the downside risk of holding stock.

Name: A protective put is a costless way of eliminating the downside risk of holding stock.
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Question

Quizplus · Accepted Answer

A protective put involves purchasing a put option, which incurs a cost. The cost of purchasing the put option is offset by the potential profit if the stock price decreases. Therefore, a protective put is not costless.

A Protective Put Is a Costless Way of Eliminating the Downside