Value of Portfolio 34,553,799.

00
Beta (NASDAQ) 1.65
Beta (S&P 500) 2.41
 Alpha 3.35
Beta 1.65

NASDAQ MOVEMENTS (+/ -) 10%

NASDAQ MOVEMENTS (+/ -) 20%
NASDAQ MOVEMENTS (+/ -) 40%

Initial Value NASDAQ + 10%

Long Portfolio 34,553,799.00 41,412,728.10
Short NASDAQ 57,013,768.35 51,312,391.52
91,567,567.35 92,725,119.62
3.35%

Initial Value NASDAQ + 20%

Long Portfolio 34,553,799.00 47,114,104.94
Short NASDAQ 57,013,768.35 45,611,014.68
91,567,567.35 92,725,119.62
3.35%

Initial Value NASDAQ + 40%

Long Portfolio 34,553,799.00 58,516,858.61
Short NASDAQ 57,013,768.35 34,208,261.01
91,567,567.35 92,725,119.62
3.35%
Portfolio Return (Alpha +
Beta*Market Return)

19.85 -13.15
36.35 -29.65
69.35 -62.65

NASDAQ - 10%
30,009,974.43
62,715,145.19
92,725,119.62
3.35%

NASDAQ - 20%
24,308,597.60
68,416,522.02
92,725,119.62
3.35%

NASDAQ - 40%
12,905,843.93
79,819,275.69
92,725,119.62
3.35%
SHORT SELLING
1. Used to eliminate the general market risk from the portfolio
2. Expected Return = Alpha + Beta*Market Return
3. Removes market return component, leaving only alpha return in the portfolio
4. Return n hedged portfolio = Guaranteed Alpha, whether up or down.
5. Assumes Beta remains constant
Calls Strike Price Bid Ask Days To Maturity
Aug 70 25.5 26 23
Aug 75 20.625 21.125 23
Aug 80 16 16.375 23
Aug 85 11.75 12.125 23
Aug 90 7.875 8.25 23
Aug 95 4.75 5.125 23
Aug 100 2.5 2.75 23
Aug 105 1.0625 1.25 23
Aug 110 0.375 0.5 23
Aug 115 0.125 0.25 23
Aug 120 0 0.125 23
Sep 70 26 26.75 58
Sep 75 21.5 22.25 58
Sep 80 17.375 17.875 58
Sep 85 13.5 14 58
Sep 90 10.125 10.625 58
Sep 95 7.25 7.625 58
Sep 100 4.875 5.25 58
Sep 105 3 3.25 58
Sep 110 1.6875 1.875 58
Sep 115 0.875 1.0625 58
Sep 120 0.4375 0.5625 58
 QQQ 95.63

Puts Strike Price Bid Ask Days To Maturity

Aug 70 0.0625 0.1875 23
Aug 75 0.1875 0.3125 23
Aug 80 0.5 0.6875 23
Aug 85 1.0625 1.25 23
Aug 90 2.125 2.375 23
Aug 95 4 4.25 23
Aug 100 6.75 7.125 23
Aug 105 10.25 10.625 23
Aug 110 14.5 14.875 23
Aug 115 19.375 19.75 23
Aug 120 24.375 24.875 23
Sep 70 0.5 1.0625 58
Sep 75 0.875 1.0625 58
Sep 80 1.5625 1.75 58
Sep 85 2.5625 2.8125 58
Sep 90 4 4.375 58
Sep 95 6 6.375 58
Sep 100 8.625 9 58
Sep 105 11.75 12.25 58
Sep 110 15.5 16 58
Sep 115 19.75 20.25 58
Sep 120 24.25 25 58
 Hypothetical Price
Current NASDAQ Fluctuations
P1
QQQ 95.63 P2
DELTA HEDGING
1. Extreme volatility in the market
2. When Beta of portfolio is dynamic and changing rapidly in volatile environment
3. Long Position on Stock can be hedged by a Long Position in Put Options

**We will use the ATM AUG95 Put Option to hedge our portfolio

Puts Strike Price Bid Ask Days To Maturity Moneyness Implied Volatility
Aug 70 0.0625 0.1875 23 OTM 68.84%
Aug 75 0.1875 0.3125 23 OTM 61.87%
Aug 80 0.5 0.6875 23 OTM 59.18%
Aug 85 1.0625 1.25 23 OTM 54.33%
Aug 90 2.125 2.375 23 OTM 51.55%
Aug 95 4 4.25 23 ATM 49.65%
Aug 100 6.75 7.125 23 ITM 49.84%
Aug 105 10.25 10.625 23 ITM 48.73%
Aug 110 14.5 14.875 23 ITM 50.21%
Aug 115 19.375 19.75 23 ITM 58.57%
Aug 120 24.375 24.875 23 ITM 70.99%
Sep 70 0.5 1.0625 58 OTM 64.71%
Sep 75 0.875 1.0625 58 OTM 53.90%
Sep 80 1.5625 1.75 58 OTM 51.67%
Sep 85 2.5625 2.8125 58 OTM 49.96%
Sep 90 4 4.375 58 OTM 48.84%
Sep 95 6 6.375 58 ATM 47.30%
Sep 100 8.625 9 58 ITM 46.40%
Sep 105 11.75 12.25 58 ITM 46.27%
Sep 110 15.5 16 58 ITM 46.59%
Sep 115 19.75 20.25 58 ITM 48.39%
Sep 120 24.25 25 58 ITM 53.22%

-
pothetical Price (For The Portfolio Increase/Decrease
(In Percentages)
Fluctuations With Beta 1.65) in Portfolio
85 -11% -18% -6,337,512.89
100 5% 8% 2,605,355.72

Delta Gamma Vega Theta Rho

-0.03 0.00 0.02 -0.02 0.00
-0.05 0.01 0.02 -0.03 0.00
-0.10 0.01 0.04 -0.05 -0.01
-0.17 0.02 0.06 -0.07 -0.01
-0.29 0.03 0.08 -0.09 -0.02
-0.44 0.03 0.09 -0.09 -0.03
-0.60 0.03 0.09 -0.09 -0.04
-0.75 0.03 0.08 -0.07 -0.05
-0.85 0.02 0.06 -0.05 -0.06
-0.88 0.01 0.05 -0.05 -0.07
-0.88 0.01 0.05 -0.06 -0.07
-0.08 0.01 0.06 -0.03 -0.01
-0.10 0.01 0.07 -0.03 -0.02
-0.15 0.01 0.09 -0.04 -0.03
-0.23 0.02 0.12 -0.05 -0.04
-0.32 0.02 0.14 -0.05 -0.06
-0.43 0.02 0.15 -0.05 -0.08
-0.54 0.02 0.15 -0.05 -0.10
-0.64 0.02 0.14 -0.04 -0.12
-0.73 0.02 0.13 -0.04 -0.14
-0.79 0.02 0.11 -0.03 -0.15
-0.82 0.01 0.10 -0.03 -0.16
 This is same as the increase/decrease in
equivalent NASDAQ Porfolio.

No. of NASDAQ Shares Equivalent to Portfolio

5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
5961.91
 With the Change in the underlying stock price of
NASDAQ, the value of the Put Optionss will change
as well

Number of Put Contracts Required to Delta Hedge Hedging Cost Current Portfolio
214,192 4,016,093.79 57,013,768.35
124,705 3,897,017.84 57,013,768.35
61,686 4,240,934.73 57,013,768.35
35,364 4,420,476.56 57,013,768.35
20,786 4,936,620.67 57,013,768.35
13,484 5,730,736.96 57,013,768.35
9,866 7,029,366.99 57,013,768.35
7,957 8,453,914.14 57,013,768.35
7,050 10,487,134.15 57,013,768.35
6,805 13,440,788.30 57,013,768.35
6,792 16,896,136.13 57,013,768.35
70,660 7,507,612.92 57,013,768.35
59,837 6,357,676.69 57,013,768.35
38,552 6,746,540.57 57,013,768.35
25,966 7,302,807.31 57,013,768.35
18,451 8,072,529.78 57,013,768.35
13,924 8,876,302.76 57,013,768.35
11,073 9,966,024.45 57,013,768.35
9,298 11,389,541.07 57,013,768.35
8,183 13,093,452.05 57,013,768.35
7,539 15,266,145.77 57,013,768.35
7,265 18,161,520.13 57,013,768.35
 Premium at P 0.1875 0.3125 0.6875
derlying stock price of Premium at P1
0.83 1.4 2.67
Put Optionss will change
Premium at P2 0.096 0.157 0.364

Calculations
Portfolio @P1 Portfolio @P2 Net Change @ P1 Net Change @ P2 P1 Put Payoff
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 13,761,814.73
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 13,561,622.09
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 12,229,313.62
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 11,316,419.98
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 10,049,920.39
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 8,886,013.30
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 7,946,884.36
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 7,308,160.13
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 6,912,695.82
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 6,757,824.19
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 6,700,718.91
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 9,521,419.68
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 10,037,649.54
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 9,599,363.44
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 9,081,446.61
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 8,570,720.19
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 8,138,351.32
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 7,740,278.99
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 7,391,579.72
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 7,127,747.96
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 6,928,191.58
50,676,255.46 59,619,124.07 -6,337,512.89 2,605,355.72 6,814,202.35
 1.25 2.375 4.25 7.125 10.625 14.875 19.75
4.45 7.21 10.84 15.18 19.81 24.68 29.68
0.675 1.36 2.62 4.79 7.62 11.387 16.07

P2 Put Payoff Total - P1 Total - P2 Hedging Cost/Portfolio

-1,959,853.77 7,424,301.84 645,501.95 11.6%
-1,939,156.08 7,224,109.20 666,199.64 11.3%
-1,995,552.56 5,891,800.73 609,803.16 12.3%
-2,033,419.22 4,978,907.09 571,936.51 12.8%
-2,109,755.78 3,712,407.51 495,599.94 14.3%
-2,197,906.17 2,548,500.42 407,449.55 16.6%
-2,303,659.22 1,609,371.48 301,696.51 20.3%
-2,390,965.84 970,647.24 214,389.89 24.5%
-2,459,100.77 575,182.93 146,254.95 30.4%
-2,504,410.17 420,311.31 100,945.55 38.9%
-2,523,382.74 363,206.02 81,972.98 48.9%
-2,215,187.44 3,183,906.79 390,168.29 21.7%
-2,169,089.69 3,700,136.66 436,266.03 18.4%
-2,197,444.64 3,261,850.55 407,911.08 19.5%
-2,239,527.58 2,743,933.72 365,828.15 21.1%
-2,278,759.84 2,233,207.30 326,595.89 23.4%
-2,318,281.43 1,800,838.43 287,074.29 25.7%
-2,358,625.79 1,402,766.10 246,729.94 28.8%
-2,408,074.40 1,054,066.83 197,281.32 33.0%
-2,446,838.85 790,235.07 158,516.87 37.9%
-2,472,738.67 590,678.70 132,617.05 44.2%
-2,493,939.94 476,689.46 111,415.78 52.6%
24.875 1.0625 1.0625 1.75 2.8125 4.375 6.375 9 12.25 16 20.25 25
34.74 2.41 2.74 4.24 6.31 9.02 12.22 15.99 20.2 24.71 29.44 34.38
21.16 0.749 0.7 1.18 1.95 3.14 4.71 6.87 9.66 13.01 16.97 21.567