What is the profit-loss on the un-hedged spy position

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Reference no: EM131908966

1- Suppose you have 10,000 shares of the SPY. It is early October and the prices of the SPY and the December e-mini S&P500 futures contract are shown below. Based on the spot-future b estimate (shown below), calculate the number of e-mini S&P 500 futures contracts you need to hedge your portfolio.

(SPY = 111.85 and /ESZ9 = 1122 bs,FC = 0.98, Z = 20)

2- Suppose now it is 35 DTM and the risk free rate has stayed constant at 1.48% since you initiated the hedge in October. The SPY are currently priced at 102.5. If the change in the basis is only due to time decay, what is the profit/loss on the un-hedged SPY position and on the hedged position?

Reference no: EM131908966

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