When you purchase a put option while still holding the underlying share, it is known as a
A)speculative put.
B)speculative call.
C)protective call.
D)protective put.

Question

Quizplus · Accepted Answer

When you purchase a put option while still holding the underlying share, it is known as a protective put. This strategy allows you to protect your profits by limiting your potential loss if the stock price were to decrease. The put option gives you the right to sell the shares at a predetermined price, providing a hedge against any decline in the stock's value.

When You Purchase a Put Option While Still Holding the Underlying