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The XYZ stock has a beta of 1.1 with respect to the SPY ETF.  You have invested $10,000 in XYZ but you are concerned about the possibility of the S&P500 index moving down, so you want to make your investment “market neutral”. Shares of SPY cost $50.  What action do you take? Short sell 220 shares of SPY Buy 200 shares of SPY Shor-sell 200 shares of SPY Buy put options on the SPY Sell Call options on the SPY

The XYZ stock has a beta of 1.1 with respect to the SPY ETF.  You have invested $10,000 in XYZ but you are concerned about the possibility of the S&P500 index moving down, so you want to make your investment “market neutral”. Shares of SPY cost $50.  What action do you take? Short sell 220 shares of SPY Buy 200 shares of SPY Shor-sell 200 shares of SPY Buy put options on the SPY Sell Call options on the SPY

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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The XYZ stock has a beta of 1.1 with respect to the SPY ETF.  You have invested $10,000 in XYZ but you are concerned about the possibility of the S&P500 index moving down, so you want to make your investment “market neutral”. Shares of SPY cost $50.  What action do you take?

  1. Short sell 220 shares of SPY
  2. Buy 200 shares of SPY
  3. Shor-sell 200 shares of SPY
  4. Buy put options on the SPY
  5. Sell Call options on the SPY

 

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