A trader has decided to roll a short hedge forward until December to hedge a long...
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A trader has decided to roll a short hedge forward until December to hedge a long position in corn inventory. The schedule below shows the dates on which trades are made and the prices. a. Determine the effective price at which the corn was sold on December 10. b. Explain whether the trader would have made more (or less) profit if it had not hedged its inventory position. Action Sell March Futures Buy March Futures Date Price February 6 $5.73 March 15 $6.20 March 15 $5.90 May 16 $5.10 May 16 Sell July Futures $5.30 July 22 Buy July Futures $5.70 July 22 Sell September Futures $6.20 September 17 Buy September Futures $6.90 September 17 Sell December Futures $6.95 December 12 Buy December Futures $6.50 December 12 Sell Cash Inventory $6.45 Sell May Futures Buy May Futures A trader has decided to roll a short hedge forward until December to hedge a long position in corn inventory. The schedule below shows the dates on which trades are made and the prices. a. Determine the effective price at which the corn was sold on December 10. b. Explain whether the trader would have made more (or less) profit if it had not hedged its inventory position. Action Sell March Futures Buy March Futures Date Price February 6 $5.73 March 15 $6.20 March 15 $5.90 May 16 $5.10 May 16 Sell July Futures $5.30 July 22 Buy July Futures $5.70 July 22 Sell September Futures $6.20 September 17 Buy September Futures $6.90 September 17 Sell December Futures $6.95 December 12 Buy December Futures $6.50 December 12 Sell Cash Inventory $6.45 Sell May Futures Buy May Futures
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