Put options are typically used to hedge

Question

Quizplus · Accepted Answer

Put options are contracts that give the holder the right, but not the obligation, to sell a security at a specified price (strike price) within a specific time frame. They are typically used as a hedging tool to protect against a temporary decline in a stock's value. This allows investors to limit potential losses without having to liquidate their positions. Therefore, the best choice is C, when portfolio managers are mainly concerned with a temporary decline in a stock's value.

Put Options Are Typically Used to Hedge