Asked by Pinky Melon on Jun 25, 2024
Verified
The primary purpose of a protective put is to limit the downside risk of asset ownership:
Protective Put
An investment strategy that involves buying put options on stocks that are already owned to hedge against potential declines in the value of those stocks.
Downside Risk
Refers to the potential loss in value of an investment or asset if the market conditions deteriorate.
- Comprehend the utilization of protective puts for mitigating potential losses.
Verified Answer
SE
Shawndavia EdwardsJun 30, 2024
Final Answer :
True
Explanation :
A protective put involves buying a put option for an asset you already own, which gives you the right to sell the asset at a predetermined price, thus limiting potential losses if the asset's value falls.
Learning Objectives
- Comprehend the utilization of protective puts for mitigating potential losses.