What to hedge against possible falls in value of portfolio

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Problem 1: You are the manager of the Bethela House Investment Fund. On 12 July, you receive notice that the fund will be sold on 30 August. The fund comprises a diversified portfolio of listed Australian shares. It is currently valued at $17 million. You hedged this risk using September SPI 200 futures. On 12 July, the contract price of the September SPI 200 futures contract was 5421. To hedge against possible falls in the value of the portfolio, you would:

Option 1: Buy 125 futures contracts.
Option 2: Sell 125 futures contracts.
Option 3: Buy 5719 futures contracts.
Option 4: Buy 5319 futures contracts.
Option 5: None of the above answers is correct.

Reference no: EM132918989

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