Imagine you are managing a copper mine and plan to sell 800 metric tons of copper 3
Fantastic news! We've Found the answer you've been seeking!
Question:
Imagine you are managing a copper mine and plan to sell 800 metric tons of copper 3 months from today. Since you do not know the future price of copper, you are considering employing a put protection strategy to manage your price risk. A put option giving you the right to sell 1 metric ton of copper for $6.40 per kilogram 3 months from now costs $360. This is the option you want to use.
State the net cash position with and without the put protection, if the spot price of copper in 3 months' time turned out to be:
- i.$5.10
- ii.$6.80?
Explain and show your workings
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date: