Today you tell your broker to purchase a put option to sell an August guinea pig futures contract (300 guinea pigs) at $3.22 per pig. Your local basis for guinea pigs in August is $0.11 per pig. The option costs $0.07 and futures contracts are $0.01 per contract. You know you have a local market selling Vasco as many guinea pigs as he can get (he trains them to race). The maximum local price you would need to execute (take) the option (aka floor price) is $ August arrives. Futures are $3.13/guinea pig and basis is actually $0.13. You take the sell option you have and buy a futures contract at the current price to offset. This hedge gives you a net price of $ per pig. You receive a total profit/loss check for $ from the hedge. use parentheses... (1.23) to show loss/negative Vasco will pay you $ per pig for local sale for a total local check of $ . Your total combined revenue for one guinea pig contract is $

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Here are the steps to solve this problem You purchased a put option to sell an August gui... View the full answer