Question 6 1 pts Monitor others vix VIX futuresvWato CHANGE LAST 13.83 VIX INDEx

Question

Question 6 1 pts Monitor others vix VIX futuresvWato CHANGE LAST 13.83 VIX INDEx VIK Nov23'16 QCFE -0.65 15.10000.3500 VIX Dec21'16 QCFE 15.80000.2000 17.1000 -0.1500 VIX Feb15, 17 OCE 17.7500-0.1500 18.2000-0.1500 VTX Apr1917 0CFE 18.7500-0.1500 19.3000 -0.1000 19.7000 0.1500 Dec07, 16 ecre VIX Jan1817 OCFE VIX Mar22'17 OCFE VIX Jun21'17 OcFE -4.49% 2.27% 15.7500-0.2000-1.25% 1.25% -0.87% -0.84% -0.82% -0.79% -0.52% -0.76% VIX Jul19'17 GCFE VDXX 30.60 -0.69 -2.21% On Nov 15th, the SPY was trading at 217.2. Suppose you sell eleven contracts with Dec. 21 maturity. How many shares of SPY do you buy to hedge your VIX futures position? Round off to the nearest integer. If your answer involve shorting say, 10 shares of SPY, then you buy -10 This question is graded with an error margin of 10 and builds on your answer to question 4.)

Explanation / Answer

Options. In terms of options, a lot represents the number of contracts contained in one derivative security. One equity option contract represents 100 underlying shares of a company's stock. In other words, the lot for one options contract is 100 shares.

Question1.

On Nov. 15 th the spy was trading at 217.2, suppose you sell eleven contacts with Dec 21, maturity, how many shares of SPY do you buy to hedge your VIX futures position?

VIX Index Last Change VIX Index 13.53 -0.65 -4.49% Return on future ViX nov23'16 15.1 -0.35 -2.27% 11.60% ViXdec07'16 15.75 -0.2 -1.25% 4.30% Vix dec21'16 15.8 -0.2 -1.25% 0.32% vix jan 18'17 17.1 -0.15 -0.87% 8.23% vix feb15'17 17.75 -0.15 -0.84% 3.80% vix mar22'17 18.2 -0.15 -0.82% 2.54% vix apr 19'17 18.75 -0.15 -0.79% 3.02% vix jun 21'17 19.3 -0.1 -0.52% 2.93% vix jul19'17 19.7 -0.5 -0.76% 2.07% Sold 11 Contract with 21 Dec maturity                   =11*100*15.8 Value $17,380 Beta of VIX future is 1.08867           =$17380*1.08867 SPY you buy to hedge your VIX future with given value $18,921.12 Refer 1 How many shares would be buying of SPY is       =$18,921.12/217.2 Shares 87 Q9 Spy goes down 2%                    =217.2*2% 4.344 Now value of Spy                   =217.2-4.344 212.856 Further goes down 1%                   =212.856*1% 2.12856 After value                  =212.856-2.12856 211 SPY Value after above correction                    =87*211 18381.01319 Refer2 By comparing 1&2                =$18921.12-18381.01 Ngetive P&L -540.11

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