Garner Money Management, Inc., is in charge of a $50 million portfolio. Its beta is equal to the market. To hedge its position, it sells (writes) 200 December 1100 call option contracts on the S&P 500 Stock Index as shown in Table 16–5 on page 426. It also buys 300 December 1100 put option contracts on the same index shown in Table 16–5. Instead of going down, the market goes up by 10 percent (as does the portfolio), and the S&P 500 Stock Index ends at 1,263.00.
Consider the change in the portfolio value and the gains or losses on the call and put options. Each option contract trades in units of 100. What is the overall net gain or loss of Garner Money Management as a result of the changes in the market?