On July 1, an investor holds 100,000 shares of a certain stock. The market price is $100 per share and the beta of the stock is 1.5. The investor would like to change the beta of the stock portfolio to 1.25 using the September S&P 500 E-Mini stock index futures contract. The futures price is 4,500 and one contract is for delivery of $50 times the index. What strategy should the investor follow?
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On July 1, an investor holds 100,000 shares of a certain stock. The market price is $100 per share and the beta of the stock is 1.5. The investor would like to change the beta of the stock portfolio to 1.25 using the September S&P 500 E-Mini stock index futures contract. The futures price is 4,500 and one contract is for delivery of $50 times the index. What strategy should the investor follow?
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- On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the September Mini S&P 500 futures contract. The index is currently 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3. What strategy should the investor follow? Under what circumstances will it be profitable?On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the September Mini S&P 500 futures contract. The index is currently 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3. What strategy should the investor follow?On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the September Mini S&P 500 futures contract. The index is currently 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3. What strategy should the investor follow to reduce beta to 0?
- On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month decides to use the September Mini S&P 500 futures contract. The index is currently 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3. What strategy should the investor follow? Under what circumstances will it be profitable?explain itOn 1st of May, an investor holds 80 000 shares of a Yahoo. The market price is $87 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the August S&P 500 futures contract. The index is currently at 2800 and one contract is for delivery of $50 times the index. The beta of the stock is 0.75. What is the number of contracts that should be hedged and the type of hedging strategy should the investor follow? Choose the right answer: a. 37 contracts should be longed b. 4 contracts should be longed c. 4 contracts should be shorted d. 37 contracts should be shortedi.On April 1, an investor holds 40,000 shares of a certain stock. The market price is $28 per share. The investor is interested in completely hedging against movements in the market over the next month and decides to use the June Mini S&P 500 futures contract. The index is currently 4,500 and one contract is for delivery of $50 times the index. If the beta of the stock is 1.2, what strategy should the investor follow to completely hedge their stock portfolio? ii. After a month, the investor wishes to partially unwind their hedge to reach an overall target beta of 1. Using your answer from above, what strategy should the investor follow to reach their target? They still hold 40,000 shares and the market price is now $27.5 per share. The June Mini S&P Futures index is still at 4,500 and one contract for delivery is of $50 times the index. What will be the residual remaining position in their futures contracts?
- The stock of Suncor Energy is currently trading for $36 per share. An investor expects the stock price to move up in the next two months, and decided to invest $7, 200 in this stock. If the investor invests all the money in the stock, how much is the profit or loss if the stock price in two months turns out to be i) 40 or ii) 32? If the investor invests all the money in call options with a strike price of $35 and price of the call is $2 per share, how much is the profit or loss if the stock price in two months turns out to be i) 40 or ii) 32?On July 1, 2020 an investor holds 50,000 shares of a certaincompany stock. The market price at this time is $30 per share. (a) what is the current value of investor’s portfolio Value_________ The investor is interested in hedging against movements in the market over the next months (until Sep 2020) and decides to use the September 2020 Mini S&P 500 futures contract. The index futures price is currently 1,500 and one contract is for delivery of $50 times the index. (b) What is the current value of one Mini S&P 500futures contract? Value___________ (c) The beta of the stock is 1.3. How can investor hedge his portfolio against market risk exposure by trading S&P 500 market index Trading strategy______ (d) The beta of the stock is 1.3. How can investor hedge his portfolio against market risk exposure using futures contract. Should he/she enter LONG or SHORT position. For how many futures contracts? SHORT or LONG (circle) N contracts________ (e)…A trader has written 100 calls on stock X, all with the same strike and maturing in a year. The calls were sold at $15 each, and the stock price at the time of sale was $130. After 1 month, the stock price has increased to $148 and the call premium has increased to $17. How can you hedge the short-call position? a. Buy 10 stocks b. Short 11 stocks c. Buy 11 stocks d. Short 10 stocks e. None of the above
- A stock has a current price of $267. A trader writes 7 naked option contracts on the stock, each contract covering 100 shares. The option price is $2, the strike price is $230, and the time to maturity is 4 months. What is the margin requirement if the options are call options (in $)?An investor believes that the Cisco stock price is going to increase in the following 12 months from the current stock price of $200. Call options on Cisco stock expiring in 12 months have a strike price of $210 and sell at a premium of $20 each. The investor has $19,000 to invest, and is considering 3 alternatives: Purchase 950 call options. Purchase 95 shares. Invest $17,100 in a money market fund returning 8% per year and buy 95 call options with the remaining money. Assume that the stock price will be $237 per share after 12 months. What will be the investor's rate of return for alternative 2? What will be the investor's rate of return for alternative 3?It is July 16. A company has a portfolio of stocks worth $100 million. The beta of theportfolio is 1.2. The company would like to use the December futures contract on a stock index to change the beta of the portfolio to 0.5 during the period July 16 to November 16. Theindex futures price is currently 2,000 and each contract is on $250 times the index. (a) Whatposition should the company take? (b) Suppose that the company changes its mind anddecides to increase the beta of the portfolio from 1.2 to 1.5. What position in futurescontracts should it take?