A trader who is long RM 20 million of Malaysian stocks goes long FBM KLCl calls and short KLCI puts. (both the calls & puts are at-the-money).

i) (Can this be considered a hedge position?) [3 markah/ marks]

ii) (What must his expectation of the underlying market be?) [3 markah/ marks]

iii) (What is likely to happen if the market moves down?) [4 markah/ marks