Question
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
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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Introduction To Corporate Finance
Authors: Laurence Booth, Sean Cleary
3rd Edition
978-1118300763, 1118300769
