3. An equity investor who holds a large investment in the S&P 500 is concerned that stocks may fall further. He has two options: 1) he can simply sell his stocks or 2) he can hold on to the stocks and separately enter a futures contract to hedge his risk. State one way in which the second option is better than the first, one way in which the first option is better than the second, and one way in which both options are equivalent. (6pt)