1. A portfolio manager wishes to hedge his $500,000 stock portfolio with a Beta of 1.5 against a short-term market decline so that the portfolio value does not drop below $450,000. S&P 500 Index Futures stands at 1000 and each contract is worth $100,000. The risk-free rate is 12% per annum. The dividend yield on both the portfolio and the index is 4%. The portfolio manager is going to use options on the S&P 500 Index Futures.

Should he buy calls, sell calls, buy puts or sell puts? On how many contracts? What should be the strike price of the options?