Question: (Chapter 2) You are managing an active mutual fund that tries to beat the S&P 1500 index. Although you believe your portfolio holds the stocks

(Chapter 2) You are managing an active mutual fund that tries

(Chapter 2) You are managing an active mutual fund that tries to beat the S&P 1500 index. Although you believe your portfolio holds the stocks in the index with the highest expected returns, you think your portfolio risk level is too high. Since there is an actively-traded exchange traded fund (ETF) on the benchmark index (Symbol: SPR), you are considering adding a bearish SPR options position to your portfolio. You can either buy an SPR put option or sell an SPR call option. How do you determine which of these hedging strategies to implement? 3

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