Explanation:
A protective put is an options strategy where an investor holds a long position in the underlying asset (such as shares of stock) and simultaneously buys a put option on the same asset. This acts as an insurance policy against a decline in the asset's value.
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Q.4 Which of the following correctly describes a protective put?
A
Long position in a put option and a short position in the underlying shares
B
Long position in a put option while the underlying shares are held
C
Short position in a put option and a long position in the underlying shares
D
Short position in a put option and short position in the underlying shares
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