A Protective Put Entails the Purchase of a Put Option

question 28

True/False

A protective put entails the purchase of a put option on a stock to limit the downside risk associated with owning that stock.

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Definitions:

Rental Property

Real estate property that is owned by an individual or entity and rented out to tenants in exchange for monthly rental payments.

Recognized Gain

is the portion of a gain that is subject to taxation under the tax laws after the sale or exchange of an asset.

Basis

The original value or cost of an asset or investment for tax purposes, crucial for calculating gain or loss on disposition.

Like-Kind Exchange

A tax deferment strategy where an asset is exchanged for another similar asset, deferring capital gains taxes.