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Suppose we have a $10M portfolio that has a beta of .89. You decide to hedge this portfolio using S&P 500 index options. The S&P

  1. Suppose we have a $10M portfolio that has a beta of .89. You decide to hedge this portfolio using S&P 500 index options. The S&P 500 index is currently at 3,557.54. You choose to use put options that expire in 30 days with a strike price of 3500. The risk free rate is .5%. The volatility of the S&P 500 is .22.

    How many option contracts do you need to buy to create a delta neutral portfolio?

    A.

    66

    B.

    70

    C.

    80

    D.

    115

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