1. Devon Energy, a gas processing company, expects to pay for 400,000 mmBtu of natural gas at a close of day on Friday, September 9^th. They want to hedge their position with Henry Hub natural gas futures. Assume that they enter into the position at close of day on Tuesday, September 6th. The size of one natural gas futures is 10,000 mmBtu. Futures and spot data are provided in the file HW1_data.doc.
   2. Describe the position they should enter (long or short, contract month).
   4. Compute the hedge ratio using data from Data_hw1.xls file.
   6. How many contracts do they need to buy or sell?
   8. Document the price gain or loss every day that their position is open.6:
   10. What is the total cost after they have closed out their futures position, and made their payment?
   12. What is the effective cost per mmBtu?

Date 2-Sep-16 Futures Spot Price Price $2.90 $2.85 1-Sep-16 $2.91 $2.91 31-Aug-16 $3.00 $2.94 30-Aug-16 $2.95 $2.92 29-Aug-16 $3.01 $2.95 26-Aug-16 $3.03 $2.87 25-Aug-16 $3.01 $2.86 24-Aug-16 $2.97 $2.77 23-Aug-16 $2.92 $2.71 22-Aug-16 $2.84 $2.74 19-Aug-16 $2.78 $2.64 18-Aug-16 $2.87 $2.71 17-Aug-16 $2.83 $2.71 16-Aug-16 $2.83 $2.71 15-Aug-16 $2.81 $2.71 12-Aug-16 $2.80 $2.70 11-Aug-16 $2.79 $2.67 10-Aug-16 $2.80 $2.73 9-Aug-16 $2.84 $2.75 8-Aug-16 $2.94 $2.83