A portfolio manager has constructed a diversified stock portfolio, and notices that the return on the portfolio has a very high correlation with the S&P500 index. The manager is worried about the fact that the volatility of the market might increase, and is considering constructing a hedge to protect the portfolio from this volatility by taking a position in futures or options on the S&P500 index. Which of the following statements is correct?

a. The manager can hedge by selling the appropriate number of futures on the S&P500. Profits and losses from the futures position are likely to offset profits and losses on the portfolio, so risk is reduced.

b. The manager can hedge by buying the appropriate number of call options on the S&P500. The profits from the calls are likely to offset the losses from a fall in the portfolio value, but the manager is still likely to benefit from a rise in portfolio value.

c. The manager can hedge by selling the appropriate number of futures on the S&P500. The profits from the futures position are likely to offset the losses from a fall in the portfolio value, but the manager is still likely to benefit from a rise in portfolio value.

d. The manager can hedge by selling the appropriate number of put options on the S&P500. The profits from the puts are likely to offset the losses from a fall in the portfolio value, but the manager is still likely to benefit from a rise in portfolio value.