You are recently hired by a hedge fund named SSG Investments. You decide to use 100...

 

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You are recently hired by a hedge fund named SSG Investments. You decide to use 100 futures contracts to hedge an exposure to the price of copper. Each future contract is on 7,000 pounds of copper. At the time the hedge is closed out, the basis is $0.40 per pound. What is the effect of the basis on your financial position if the contracts are hedging the purchase of copper in the future? You are recently hired by a hedge fund named SSG Investments. You decide to use 100 futures contracts to hedge an exposure to the price of copper. Each future contract is on 7,000 pounds of copper. At the time the hedge is closed out, the basis is $0.40 per pound. What is the effect of the basis on your financial position if the contracts are hedging the purchase of copper in the future?

Answer rating: 100% (QA)

A positive basis in this scenario benefits your financial position if the contracts are hedging the purchase of copper in the future Heres why BasisTh... View the full answer