Business: Protective Put
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What is a protective put? What position in call options (with same underlying assets, exercise price, and maturity) is equivalent to a protective put? (If you need to combine other assets with the call options, please state what asset(s) is needed and how much is needed).
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This solution explains what a protective put is and provides a detailed answer to a question related to them.
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A put is an option that increases in value as the underlying asset declines in value. A protective put hedges the position. For example, you own 100 shares of Microsoft that cost $30 per share. The total investment is $300. You are concerned that if Microsoft shares decline near term (perhaps due to gobal unrest), you will lose money. You can purchase a ...
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