What strategy you employed to hedge

Reference no: EM133264783

Question: Your trading aims to hedge your risk exposure to the stock market risk as well as generating short-term profit. For student whose student number end with odd number, assume you hold a S&P 500 index fund worth $2,000,000 on the trading session day. For student whose student number end with even number, assume you hold a Nasdaq 100 index fund worth $2,000,000 on the trading session day. You aim to use Equity index future products to hedge your price risk.

You also have $100,000 USD cash on hand at the beginning of your trading. You must use at minimum 50% of your account balance to hedge your stock price risk. Meanwhile, you are allowed to have up to 50% of your account balance to speculating/arbitraging, and the speculation/arbitrage products are not limited to Equity Index futures (e.g., other future products, you can even use Crypto futures to
earn short-term profit, but also mind the potential loss).

Your report must include the following sections:

1. Trading objectives:
Give an overview of your trading objectives.

2. Summarize your hedging strategy
Provide a summary on how you use Equity Index future products to hedge your stock market price risk. The content should include but not limited to:
- How much percentage do you hedge your portfolio? And why?
- Which future product(s) you use to hedge your risk, outline their basic specs?
- What strategy you employed to hedge (e.g., delivery month, contract price, contract amount, long or short, etc)?
- What is the performance of your hedging by the end of your last trading date? And how the spot price change for your fund holding?

3. Summarize your speculation trading
Provide a summary on how you use future contracts to speculate/arbitrage during your trading period. The content should include but not limited to:
- Do you think the 50% limits allocated on speculation is too high? And why? Do you feel speculation is risky from your trading exercise?
- How the speculation performed and explain your profit/loss?
- How your speculation strategy differs from last time (Trading session 1)?
- How you feel when you experience losses from the speculation?

Reference no: EM133264783

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