Examine an ex-post long hedging position for a future purchase of 1,000 shares of a selected ETF (e.g., S\&P 500 Spider, SPY).

a. Select a futures contract on the ETF you plan to purchase (e.g., one of the futures on the S\&P 500 futures (SPA)) to hedge the S\&P 500 Spider. Use the expiration date on the futures contract as the date of your ETF purchase.

b. Use the "Chart" screen (Chart ) to create multigraphs for the prices on the futures and the ETF. On the Chart Menu screen, select the Standard G chart; once you have loaded your securities, go to "Edit" to put your graphs in separate panels.

c. Select a beginning date that you would have implemented your hedge and a closing date near the futures expiration as the date for purchasing the ETFs and closing your hedge. Use the pricesensitivity model to determine the number of futures contracts needed to hedge the position.

d. Calculate the profit or loss on the futures position from opening and closing at the futures prices at the beginning and ending dates, the cost of purchasing the 1,000 shares of the ETF on the closing date, and the hedged cost (ETF purchase minus futures profit). Compare your hedged cost to the unhedged cost. In retrospect, was the hedge a good strategy?