CME Trading Simulator Assignment#1 You have a client that has a portfolio of $1,000,000 in an S&P 500 Index exchange traded fund and $1,000,000 in 10-year U.S. Treasury bonds. the S&P 500 Index has fallen off its highs recently and you believe that the market is going to rebound and finish the year above 4600. Recommend a derivative strategy that would increase stock market exposure for the client. You believe that a 50% increase in stock market exposure should be good enough to take advantage of the potential upward move. There is more than one way to gain exposure so there will be multiple ways to gain market leverage.

You are also worried about potential supply chain issues that could affect long term inflation. Long term inflation might be good for stocks but it's not good for bonds. You believe that rates will rise by early next year. You advise the client to hedge 50% of their bond portfolio's duration risk. Recommend a hedging strategy for the fixed income portion of the portfolio in case rates rise while bond prices fall. Try to reduce the downside but also leave any potential upside just in case the stock market falls and there is huge demand for US Treasury bonds in times of panic.

Given the portfolio above, position your futures and options account to reflect your views about the markets and either leverage the portfolio to take advantage of opportunities or hedge out the risks in the portfolio. Your job is to recommend a strategy given the scenario above and trade in the CME simulator the futures or options that you would recommend for the client's portfolio.

1. Prepare a one-page client summary letter (MS Word) detailing your transactions and the reasoning behind the transactions. 2. Implement the strategy within the CME trading simulator. This means you will have to select the right contract and then buy the correct number of contracts based on the client's portfolio. Remember to calculate the notional value of the contract to determine the number of contracts needed. 3. Attach a screenshot of the CME trading simulator to your client summary letter page.