13.10 Using Index options for Portfolio insurance Suppose the value of the index is So and the strike price is K If a portfolio has a B of 1.0, the portfolio insurance is obtained by buying 1 put option contract on the index for each 100S dollars held If the B is not 1.0, the portfolio manager buys B put options for each 100So dollars held In both cases, K is chosen to give the appropriate insurance level Options, Futures, and other Derivatives, 5th edition 2002 by John C. HullOptions, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 13.10 Using Index Options for Portfolio Insurance • Suppose the value of the index is S0 and the strike price is K • If a portfolio has a b of 1.0, the portfolio insurance is obtained by buying 1 put option contract on the index for each 100S0 dollars held • If the b is not 1.0, the portfolio manager buys b put options for each 100S0 dollars held • In both cases, K is chosen to give the appropriate insurance level