Using the estimate of 17.5 million gallons per month, how would you construct a NYMEX option hedge for the next 12 months? Using KCNB products, how would you construct a commodity-option hedge for 210 million gallons? What is the total cost of each? (Hint: use at-the-money calls and an at- the-money cap to construct the hedges.)

Answer rating: 100% (QA)

To construct a NYMEX option hedge for the next 12 months using the estimate of 175 million gallons per month we can use atthemoney calls and an atthem... View the full answer