Which one of the following acts like an insurance policy if the price of a stock you own suddenly decreases in value?
A)sale of a European call option
B)sale of an American put option
C)purchase of a protective put
D)purchase of a protective call
E)either the sale or purchase of a put

Question

Quizplus · Accepted Answer

A protective put is an options strategy where an investor buys a put option on a stock they own in order to protect against a decrease in its price. If the price of the stock falls, the put option will increase in value, offsetting the loss in the stock. The other options listed may provide some protection or income, but they do not directly act as an insurance policy against a decrease in stock price like the purchase of a protective put.

Which One of the Following Acts Like an Insurance Policy