A protective put is a way to eliminate the downside risk of holding stock.

Question

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A protective put is a strategy in options trading where an investor buys a put option on a stock they already own. If the stock price falls, the put option will increase in value, offsetting the losses from the stock. This allows the investor to limit their risk and protect their investment. Therefore, a protective put is a way to eliminate or reduce downside risk.

A Protective Put Is a Way to Eliminate the Downside