Suppose you have a stock market portfolio with a beta of 1.32 that is currently worth...

 

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Suppose you have a stock market portfolio with a beta of 1.32 that is currently worth $348 million. You wish to hedge against a decline using index options. Describe how you might do so with puts and calls. Suppose you decide to use SPX calls. Calculate the number of contracts needed if the call option you pick has a delta of .70, and the S&P 500 index is at 1,280. (Do not round intermediate calculations. A negative value should be indicated by a minus sign. Round your answer to the nearest whole number.) Suppose you have a stock market portfolio with a beta of 1.32 that is currently worth $348 million. You wish to hedge against a decline using index options. Describe how you might do so with puts and calls. Suppose you decide to use SPX calls. Calculate the number of contracts needed if the call option you pick has a delta of .70, and the S&P 500 index is at 1,280. (Do not round intermediate calculations. A negative value should be indicated by a minus sign. Round your answer to the nearest whole number.)

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To hedge against a decline in the stock market portfolio using index options you can use both put options and call options The strategy is known as a ... View the full answer