SIE Exam Question 245: Answer and Explanation

Question: 245

When an investor is bearish on the broad stock market

• A. buying calls on the S&P 500 index is an appropriate strategy
• B. buying puts on the S&P 500 index is an appropriate strategy
• C. not investing in the market is an appropriate strategy
• D. buying mutual funds is an appropriate strategy

Correct Answer: B

Explanation:

B: Buying broad-based Index Put options will provide a hedge against the decline in the broad market.