Suppose that JPMorgan Chase sells call options on $1.20 million worth of a stock portfolio with beta = 1.60. The option delta is 0.60. It wishes to hedge its resultant exposure to a market advance by buying a market-index portfolio. Suppose it use market index puts to hedge its exposure. The index at current prices represents $2,000 worth of stock and the contract multiplier is 200. a. How many dollars worth of the market-index portfolio should it purchase?

Market Index Portfolio:

b. What is the delta of a put option? (Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.)

Delta:

c. Complete the following: (Round your answer to 1 decimal place. Negative amount should be indicated by a minus sign.)

Assuming the 1 percent market movement, JP Morgan Should (sell),(buy) BLANK put contracts