Suppose you have a portfolio of stocks and think the market will go down over the period of investment. You would like to hedge the market downside risk using one E-mini S&P 500 futures contract, which currently have a quoted price of 4140. The contract unit is $50 * S&P 500 Index. Your broker currently requires $12,000 per contract as initial margin requirement and $10,000 per contact as maintenance margin. The balance of your margin account is $12,000. a. Should you go long or short on the futures contracts? b. Given your answer in part (a), what is the profit/loss for one contract if the price of the futures contracts decreases to 4110? c. Given your answer in part (a), what change in the futures price will lead to a margin call? 18

- Suppose you have a portfolio of stocks and think the market will go down over the period of investment. You would like to hedge the market downside risk using one E-mini S\&P 500 futures contract, which currently have a quoted price of 4140 . - The contract unit is $50 * S\&P 500 Index. - Your broker currently requires $12,000 per contract as initial margin requirement and $10,000 per contact as maintenance margin. The balance of your margin account is $12,000. - a. Should you go long or short on the futures contracts? - b. Given your answer in part (a), what is the profit/loss for one contract if the price of the futures contracts decreases to 4110 ? - c. Given your answer in part (a), what change in the futures price will lead to a margin call? - Suppose you have a portfolio of stocks and think the market will go down over the period of investment. You would like to hedge the market downside risk using one E-mini S\&P 500 futures contract, which currently have a quoted price of 4140 . - The contract unit is $50 * S\&P 500 Index. - Your broker currently requires $12,000 per contract as initial margin requirement and $10,000 per contact as maintenance margin. The balance of your margin account is $12,000. - a. Should you go long or short on the futures contracts? - b. Given your answer in part (a), what is the profit/loss for one contract if the price of the futures contracts decreases to 4110 ? - c. Given your answer in part (a), what change in the futures price will lead to a margin call