You Are Managing a Stock Portfolio with a Value of $100

question 6

Multiple Choice

You are managing a stock portfolio with a value of $100 million. The portfolio is unique in that the beta is-0.10. The S&P 500 is currently trading at 1,108. The delta of a call option on the index with a strike price of 1,150 has a delta of 0.52. How can you hedge your portfolio using call options?

• A) Buy 174 contracts
• B) Sell 167 contracts
• C) Buy 156 contracts
• D) Sell 174 contracts
• E) Buy 167 contracts

---

Definitions:

Consolidated Income Statement

A consolidated income statement presents the financial performance of a parent company and its subsidiaries as one combined entity.

Forward Exchange Contract

A financial agreement between parties to exchange currencies at a predetermined future date and rate.

Annual Interest Rate

The percentage of interest that will be earned or paid on investments or loans over a one-year period.

Foreign Currency Option

A financial contract which grants the owner the option, without being obliged, to convert funds in one currency to another at a set exchange rate on a determined date.