Strategy: Short E-mini S&P 500 index futures contracts

Warning: 100% Loss if the S&P 500 index moves up to and beyond 2,800 within 3 years (May 22, 2018). A very unlikely scenario, in my opinion.

From the website:

http://www.google.com/finance?q=INDEXSP:.INX&ei=xUVgVajmH8OXUPnogtgE

We can know the past 10 years historical levels of S&P 500 index.

My investment strategy is: Short S&P 500 index futures contracts

Starting time: May 22, 2015

Investment horizon: At least 3 years (May 22, 2018)

Instrument used: E-mini S&P 500 index futures contracts

Number of instruments used: 1 E-mini S&P 500 index futures for USD35,000. 2 E-mini S&P 500 index futures contracts for USD70,000. And so on.

Contract size: $50 x S&P 500 index

Funds required: 18 months salary. In other words, USD35,000/=.

Leverage involved: 1/3^rd (33%) equity and 2/3^rd (67%) debt (leverage offered by futures contract).

Contracts Maturity: 3 months.

Rolling strategy: Roll into a new index futures contract every 3 months.

Short investment initiation: May 22, 2015 at 2,126 S&P 500 index futures contract

Short investment termination:  within 3 years (May 22, 2018) at 1,500 S&P 500 index futures contract

E-mini S&P 500 index futures value: $2,126 x 50 = $106,300 (May 22, 2015)

E-mini S&P 500 index futures value at expected termination:  $1,500 x 50

=$75,000

Expected Total profit: $106,300 - $75,000 = $31,300

Expected Total profit as a percentage: =31,300/35,000= 89.42%

Transaction costs: Negligible for futures contracts.

Things to be watchful of: Contango, Backwardation. But these are of very little importance.

Reasons for shorting S&P 500 index futures contracts:

1.                 The US economy, a huge economy, is not expected to show serious growth. In other words, the growth will be slow.

2.                 The US interest rates (discount rate) has been too low (almost zero) for too long. It is expected that the interest rates will rise.

3.                 Following from the first reason, the overall stock market, and hence S&P 500 index, is not expected to show further significant growth.

4.                 The S&P 500 index is already too high (2,126 on May 22, 2015 close). Hence the index is already highly overvalued and thus offers justification for a shorting the index.

Welcome to S&P 500 index futures investments blog.