(Insuring a portfolio with options) Portfolio insurance describes a position in which an investor buys put options to insure that the value of his portfolio does not fall below a certain point. Suppose Jerry has a portfolio that consists of 100 shares of RTY stock. The current market price of RTY is $35 per share. The following options are also traded on RTY stock:

a. What options must Jerry buy if he wants to insure that the value of his portfolio will not drop below $2,000?

b. How much will this “insurance” cost?

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Expiration date Exercise price Exercise price Call price Put price 1-Jun-2017 20 18.00 0.10 1-Jun-2017 25 11.35 0.45 1-Jun-2017 35 3.50 3.20 1-Jun-2017 40 0.75 5.65