On April 1, an investor holds 40,300 shares of a certain stock. The market price is $25 per share. The investor is interested in completely hedging against movements in the market over the next month and decides to use the June Mini S&P 500 futures contract.

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On April 1, an investor holds 40,300 shares of a certain stock. The market price is $25 per share. The investor is interested in completely hedging against movements in the market over the next month and decides to use the June Mini S&P 500 futures contract. The index is currently 4,000 and one contract is for delivery of $50 times the index. The beta of the stock is 1.9. What strategy should the investor follow (3 marks)

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