Lynn Has an Equity Portfolio Valued at $15 Million That

question 63

Multiple Choice

Lynn has an equity portfolio valued at $15 million that has a beta of 1.30. She has decided to hedge this portfolio using SPX call option contracts. The S&P 500 index is currently 1,602. The option delta is .53. How many option contracts must Lynn write to effectively hedge her portfolio?

• A)137 contracts
• B)142 contracts
• C)175 contracts
• D)191 contracts
• E)230 contracts

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Definitions:

Lockouts

A situation in labor relations where an employer prevents employees from entering the workplace, usually during a dispute.

Closed Shop

A place of employment where hiring is restricted to individuals who are members of a particular labor union.

Right-to-Work Laws

Legislation that prohibits union security agreements between companies and workers' unions, allowing individuals to work without the requirement to join the union or pay dues.

Taft-Hartley Act

An American federal statute from 1947 designed to curtail the actions and influence of labor unions.