A trader is willing to sell 76,000 units of stock A in 3 months and decide to hedge the value of his position with futures contracts on another security. Each futures contract is on 6,000 units.

The current price of stock A is $25 and the standard deviation of the change in this price over the life of hedge is estimated to be 0.49. The futures price of the related asset is $29 and the standard deviation of the change in this over the life of the hedge is 0.30. The coefficient of correlation between the spot price change and futures price change is 0.85.

1. What is the minimum variance hedge ratio?

2. Should the hedger take a long or short futured position?

3. What is the optimal number of futures contracts when issues associated with daily settlement are not considered?