A portfolio is currently valued at $100m, and you wish to purchase put options on the portfolio
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A portfolio is currently valued at $100m, and you wish to purchase put options on the portfolio to eliminate the possibility that the value goes below $100m in 6 months’ time while at the same time retain as much as possible of the up-side risk. The risk free interest rate is 3% per year, a 6-month call option is worth $16.48 per $100 worth of the underlying, and a 6-month put option is worth $15 per $100 worth of the underlying. Both options have an exercise price of $100. What are the details of your put-protection strategy?
What is the value of your overall portfolio if the equity portfolio rises by 10%?
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