Question

Which of the following methods might be used to protect a profit on a diversified portfolio of stocks? Buy S&P 500 Index put options Buy put options on a S & P 500 based ETF Write S&P 500 Index put options. Index put options or Buy put options on a s & P 500 based ETF, but not Write S&P 500 Index put options. QUESTION 10 ric has just purchased a heating oil contract at $2.05 per gallon. The contract size is 21,000 gallons. Initial margin is $6,075; maintenance margin is $4,500. If the market price of heating oll is $2.15 when the contract expires, Eric's profit or loss is $(2,100) loss. $(2,400) loss. $2,100 profit. $(3,975) loss.

Answer 1

9)

Risk of profit can be eliminated by protecting the profit on the portfolio sales. This can be achieved by purchasing put options contracts. This enables to sell at a price agreed in option irrespective of price fall.

Hence, correct option is “Either Buy S&P 500 Index put options or Buy put options on a S7P 00 based ETF, but not write S&P 500 index put options”