Crude oil contracts are 1,000 barrels, are quoted in dollars per barrel, and the initial margin...

 

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Crude oil contracts are 1,000 barrels, are quoted in dollars per barrel, and the initial margin is 9,000 p O per contract. Soybean contracts are 5,000 bushels, are quoted in cents per bushel, and have an initial margin of $4,725. E-mini S&P 500 contracts are quoted in S&P 500 index value with a $50 multiplier and have an initial margin of $12,650 per contract. 1. Suppose that a farmer plants corn that will be sold in October. a. What is the farmer's spot market position in corn? b. To hedge the corn sale in the spot market in October, what will be the farmer's trades in the futures market look like? c. If corn prices go up will the farmer make a profit or loss on his hedge position? d. Describe how the former's futures markets trades hedge the spot market price of the farmer's corn. 2. JL Distribution (JLD) plans to hedge its November purchase of crude oil. a. What is JLD's spot market position in crude oil? b. To hedge the November spot market crude oil purchase, what will be JLD's trades in the futures market look like? c. If crude oil prices go up will JLD make a profit or loss on its hedge position? d. Describe how JLD's futures markets trades hedge the spot market price of its crude oil. Crude oil contracts are 1,000 barrels, are quoted in dollars per barrel, and the initial margin is 9,000 p O per contract. Soybean contracts are 5,000 bushels, are quoted in cents per bushel, and have an initial margin of $4,725. E-mini S&P 500 contracts are quoted in S&P 500 index value with a $50 multiplier and have an initial margin of $12,650 per contract. 1. Suppose that a farmer plants corn that will be sold in October. a. What is the farmer's spot market position in corn? b. To hedge the corn sale in the spot market in October, what will be the farmer's trades in the futures market look like? c. If corn prices go up will the farmer make a profit or loss on his hedge position? d. Describe how the former's futures markets trades hedge the spot market price of the farmer's corn. 2. JL Distribution (JLD) plans to hedge its November purchase of crude oil. a. What is JLD's spot market position in crude oil? b. To hedge the November spot market crude oil purchase, what will be JLD's trades in the futures market look like? c. If crude oil prices go up will JLD make a profit or loss on its hedge position? d. Describe how JLD's futures markets trades hedge the spot market price of its crude oil.

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1 a The farmer has a long position in the corn market because they will be selling corn in the futur... View the full answer