What strategy could be considered insurance for an investment in a portfolio of stocks?

Question

Quizplus · Accepted Answer

A protective put is a strategy where an investor buys a put option on a stock they own in their portfolio. This put option gives the investor the right to sell the stock at a predetermined price (strike price) regardless of how low the market price of the stock drops. This strategy provides insurance against a significant loss in the stock's value, as the investor can sell the stock at the strike price even if the market price drops much lower.

What Strategy Could Be Considered Insurance for an Investment in a Portfolio