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The sp500 today is at 2677.55 and the sp500 futures settlement price for December 2018 is at 2649.2. An investor decides to put $662,300 in a mutual fund which trakcs the sp500 and, at the same time, enter in an unspecified number of sp500 futures. The standard deviation of the sp500 returns is 10.2% and the average returns 10.9%. Decide if the investor should enter the short or long, and how many futures contracts he should take. Calculate the gains/losses for the mutual fund alone and the fund plus however many futures you decide the investor should take. Calculate all for December, supposing a year, and suppose the sp500 can vary by one std.

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