=+1 You hold 20,000 shares in ABC plc which are currently priced at 500p. ABC has developed a revolutionary flying machine. If trials prove successful the share price will rise significantly. If the government bans the use of the machine, following a trial failure, the share price will collapse.

Required a Explain and illustrate how you could use the traded options market to hedge your position.
Further information Current time: 30 January.
Traded option quotes on ABC plc on 30 January:
Calls Purs Option March June Sept.
March June Sept.
ABC ple 450 62 88 99 11 19 27 500 30 50 70 30 42 57 550 9 20 33 70 85 93 b