When stock index prices decline, what should an investor do?

When stock index prices decline, taking a short position in stock index futures is a strategic approach for an investor who expects the decline to continue or wants to hedge against further losses in their stock portfolio. By selling futures contracts, the investor can benefit from the expected drop in index prices, as they would be able to buy back the futures at a lower price later, thus realizing a profit from the declining market.

Shorting stock index futures is often used as a risk management tool, allowing investors to protect their existing investments from downside risk. This strategy can help offset potential losses in a stock portfolio that may be experiencing declines along with the broader market.

In contrast, going long on stock index futures, buying additional shares, or investing in commodities may not be favorable actions during a market downturn, as these strategies do not align with the market's bearish trend and could result in adverse outcomes if the decline persists.