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hi this is David Harper a banach turtle with an example of how we use stock index futures to hedge an equity portfolio Ill use the notation here that is given by John hole in his book on derivatives where the formula says the number of contracts we use to hedge the portfolio is equal to the change in beta that were trying to implement and that is here the target beta minus the current beta of our portfolio multiplied by this fraction which is the value of the portfolio denoted by P divided by the current value of the stocks under line 1 futures contract denoted by a and so for example if I assume I my portfolio is worth a million dollars and it has a beta of 1.4 so that its met thats its measure of co-movement with the overall market or its sensitivity to systemic risk so well assume 1.4 and then a recent SP index value of about 1400 its pretty close Ive rounded it off and then we need the value of a single SP futures contract which trades on the Chicago Mercantile multiplied by