Chartered Investment Manager (CIM) Practice Exam · Question
Which derivative strategy involves buying a put option on a stock that an investor already owns to protect against a potential decline in its price?
A protective put involves buying a put option on a stock you own. This gives you the right to sell the stock at the strike price, thereby setting a floor for yo
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Question: Which derivative strategy involves buying a put option on a stock that an investor already owns to protect against a potential decline in its price?
Answer options: ✅ Protective put
- Covered call
- Straddle
- Collar
Correct answer: Protective put
Explanation: A protective put involves buying a put option on a stock you own. This gives you the right to sell the stock at the strike price, thereby setting a floor for your potential losses if the stock price declines.
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