Beta-Neutral Futures Hedge

The portfolio's dollar market exposure is beta times portfolio value.

Divide the portfolio's beta-adjusted exposure by the exposure per futures contract.

1. 1. Compute portfolio beta exposure

   Beta-adjusted dollar exposure is $1.2\times \text{\$}10\text{M}=\text{\$}12\text{M}$.

   $$1.2\times 10,000,000=12,000,000$$

2. 2. Divide by exposure per contract

   Number of contracts to short $=\frac{\text{\$}12,000,000}{\text{\$}250,000}=48$.

   $$\frac{12,000,000}{250,000}=48$$

Answer: 48