You believe that the spread between the September S&P 500 future and S&P 500 index is too large and will soon correct. To take advantage of this mispricing a hedge fund should ________.

Question

Quizplus · Accepted Answer

Selling S&P 500 index futures will allow the hedge fund to profit from the expected correction between the futures and the index. Buying all the shares in the S&P 500 will neutralize exposure to the underlying asset, making this a hedging strategy.

You Believe That the Spread Between the September S&P 500