You manage a $50 million portfolio, currently all invested in equities, and believe that the market is on the verge of a big but short-lived downturn. You would move your portfolio temporarily into T-bills, but you do not want to incur the transaction costs of liquidating and reestablishing your equity position. Instead, you decide to temporarily hedge your equity holdings with E-mini S&P 500 index futures contracts.

Required:

Should you be long or short the contracts?

If your equity holdings are invested in a market-index fund, into how many contracts should you enter? The S&P 500 index is now at 4,100 and the contract multiplier is $50.

Note: Round your answer to 1 decimal place.

How does your answer to part (b) change if the beta of your portfolio is 0.4?

Note: Round your intermediate calculations and final answer to 1 decimal place.