An investor has a diversified portfolio of US equities. The beta on the portfolio is about 1.5 .
The investor is concerned about a decline in the value of the portfolio occurring in the next month
due to an overall movement in the market.
The investor can trade SPX options that mature in a month.
SPX at the money Calls trade for 60
SPX at the money Puts trade for 70
The Current value of the SP 500 is 4300
Options are traded in lots of 100
The value of the investors portfolio is $25, 000, 000
The investors' trade should be
Buy or Write
Put or Call
Number of Lots (round up to nearest whole number)
Cost of Trade?