One more post. Just trying to get things easier for you with the help of screenshots.
You are right about the graphics layer. So first thing is we will create a shapefile or feature class, and draw a polygon on top of the graphics rectangle.
1. In Catalog pane > navigate to your project folder > right-click the File Geodatabase (*.gdb) > New > Feature Class.
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Click Next until you reach Spatial Reference dialog. Ensure a coordinate system is selected/available (see screenshot below). Click Finish.
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The feature class is created (currently it's blank), and added to Content pane.
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2. Now let's create a polygon on top of the graphics, shall we?
Ensure the "Area of Interest" and the graphics layer are only checked in Contents pane. Uncheck the other layers.
Click on Edit tab > Create
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In Create Features pane, select the Area of Interest layer > Select Rectangle icon.
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When prompted to save all edits, click Yes.
3. You may run Grid Index Features.
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Think Location