Compare different strategies between using futures

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Question - An investor holds 60,000 shares of a stock with current market price at $35 and the beta value of the stock is 1.3. Both futures and options on the stock are available on derivative exchange with the following information available: Futures Options Quoted price $35 Quoted exercise prices: Premium Contract size 1,000 shares $34 $0.20 per share Initial margin $2,000 $35 $0.15 per share $36 $0.12 per share Contract size 1,000 shares The investor wants to hedge against market movements over the next three months. Compare and contrast the different strategies between using Futures and Options for hedging the market value of investment shares at risk exposure, advice the investor which strategy is preferred.

Reference no: EM132974824

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