Question
2. On March 31, an equity portfolio manager is concerned about the market over the next four months. Her portfolio has accumulated an impressive profit,
2. On March 31, an equity portfolio manager is concerned about the market over the next four months. Her portfolio has accumulated an impressive profit, which she wants to protect over the period ending July 27 using S&P 500 futures.
March 31:
The portfolio has a market value of $7,725,425 and a beta of 1.06.
S&P 500 September futures price: 1,305, multiplier $250.
July 27:
The stocks have declined in value to $7,518,700.
S&P 500 September futures price: 1,295.40
a) How many contracts should she use? Should she go long or short futures?
b) What is the overall dollar profit or loss?
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