You are managing a broadly diversified portfolio with a


You are managing a broadly diversified portfolio with a beta of 1.02 and a market value of $500,000. The portfolio’s benchmark is the S&P 500. Due to fears of an impending trade war, you fear a short-term drop in the market. The current value of the S&P 500 is 2681 but your volatility measures indicate it may drop to 2000 within the next 3 months. Explain how you would hedge your portfolio using S&P 500 futures contracts. (note- the futures trade at 250x the index)

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Financial Management: You are managing a broadly diversified portfolio with a
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