Suppose you are a fund manager and you hold a $10 million position in the S&P 500. You had a great Q4 2022 but you are pessimistic about 2023 so you want to hedge your position through year-end 2023. Describe the derivative trade you would you enter into so that you are about 100% hedged, but not over 100%. Your investors do not allow leveraged positions.

a. State all details of your derivative position - asset, direction, dollar amount or number of contracts, maturity, price. Be sure to reserve the amount of capital to support the trade per the exchange.

Answer rating: 100% (QA)

To hedge a 10 million position in the SP 500 I would enter into a futures contract ... View the full answer