Big East Airlines will purchase 3 million gallons of jet fuel in next 3 months and hedges

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Big East Airlines will purchase 3 million gallons of jet fuel in next 3 months and hedges using heating oil futures. From their analysis they determinejet= 0.333,heat= 0.250, and= 0.944. The current price of jet fuel in the spot market is $5.20 and the current future price of heating oil is $2.50. Assume each heating oil future or forward contract is for 42,000 gallons.

What is the optimal number of heating oil contracts if using forwards?
What is the optimal number of heating oil contracts if using futures?

Posted Date: May 16, 2024 04:04 PM

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Big East Airlines will purchase 3 million gallons of jet fuel in next 3 months and hedges

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