Hi, thanks for your reply. I think I should rephrase my question. I recognise that one would offset the other and I'm ok with that. I'd just like to know if there are any instruments/ derivatives to hedge my exposure to the index. I hope someone can help. Thanks!If you can find an instrument/derivative to " completely hedge the market risk of the index" the trade would be useless because as 1 instrument gains $1 the other would lose a $1 leaving you stuck at the initial purchase price + an extra set of transaction cost, if not many extra as the derivative expires and you need to roll continually into the next front contract.
The only use of "completely hedge the market risk of the index" would be to add a market timing model onto a long term hold to avoid needing to sell and triggering CGT events. But a lot easier said than implemented.