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Re: Need some ES comments



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Hi Colin,

A real quick one as I'm off to bed... If you were hedging a commodity,
or currency then yes, your maths is correct, though when establishing
a hedge position against physically (or synthetically) held stock,
you have to remember unless your portfolio is an exact duplicate of
the index, you will have to calculate the "beta" of each stock,
and then the beta of your portfolio on the whole.

The logic here is some stocks will under perform the index, some
will over perform, so you have to adjust equity hedge accordingly.


Justin

---

cwest wrote:


I want to mix my hedges to include ES. Here's what I understand, and I'd
appreciate any comments. For example,

ES closed at 1029.25 (Tuesday)
A tick is .25, and a tick value is $12.50.
Therefore, the notional of 1 ES contract is $51,462.50

Assuming relative volatility or beta is taken into account to determine
an adjusted portfolio capitalization or value, for each $1 million of
short-sold stock, the number of ES contracts to neutralize value (for
today) would be 20 (19.43 actually).

Thanks in advance
Colin West