Question
 A trader wants to hedge their portfolio, which has a
value of 20,00,000 by using S&P 500 futures contracts. The current price of one S&P 500 futures contract is $2,500, and the trader wants to achieve an 80% hedge. How many S&P 500 futures contracts should the trader buy or sell to achieve this hedge?Solution
We need 80% hedging of 20,00,000 value i.e., 16,00,000 Number of contracts = (Value to Hedge) / (Contract Size) Number of contracts = ($16,00,000) / ($2,500) = 640 contracts
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