Suppose that JPMorgan Chase sells call options on $1.30 million worth of a stock portfolio with beta = 1.65. The option delta is 0.65. 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 $1,000 worth of stock.

a. How many dollars worth of the market-index portfolio should it purchase to hedge its position?

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.)

c. Complete the following: (Negative amount should be indicated by a minus sign.)

Assuming the 1 percent market movement, JP Morgan should (sell or buy) _______ (how many) contracts.