Which of the following provides insurance to a portfolio manager against declines in value without limiting the increase in portfolio value?

A) protective call
B) protective put
C) butterfly spread
D) none of the aboye

Question

Which of the following provides insurance to a portfolio manager against declines in value without limiting the increase in portfolio value?

A) protective call
B) protective put
C) butterfly spread
D) none of the aboye

Quizplus · Accepted Answer

The strategy of combining put options with a portfolio is often referred to as using a protective put.The put options protect the value of the portfolio from declines though they do not limit increases in portfolio value.In essence,the put options provide insurance to the portfolio manager against declines in value,and strategies based on this approach are also sometimes described as portfolio insurance.

Which of the Following Provides Insurance to a Portfolio Manager