What strategy should the investor follow

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Reference no: EM131235752

On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the September Mini S&P 500 futures contract.

The index futures price is currently 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3. What strategy should the investor follow? Under what circumstances will it be profitable?

Reference no: EM131235752

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