The S&P index is currently is at 2,024. You manage a $5 million indexed equity portfolio (Therefore, the beta of this portfolio is 1, same as the Market) The S&P 500 futures contract has a multiplier of 250.

a) If you are bearish on the stock market, how many contracts should you sell at 2,150 to fully eliminate your risk over the next 6 months?

b) How would your hedging strategy change if instead of holding an indexed portfolio, you hold a portfolio of socks with a beta of 1.5? How many contracts would now choose to sell? Would your hedged position be riskless?