Question: Hedge and store decision: Using the opening and closing basis approach to finish the following blanks. Assume NO basis risk (the expected closing basis equals

Hedge and store decision: Using the opening and closing basis approach to finish the following blanks. Assume NO basis risk (the expected closing basis equals the actual closing basis). Date Cash Futures 1-Oct Cash Price $2.30 May Futures $2.75 Cost of holding from Oct 1 to May 1 (including interest) = $0.21 Expected Closing Basis = $0.15 What is the expected profit margin? = 1-Oct Sell May Futures @ $2.75 1-May Sell Cash @ $2.40 Buy May Futures @ ? What is futures price on May 1st? = What is the gain or loss on futures market result? What is the gain or loss on cash market result? - What is the realized price (or not selling price)? - What is the overall profit? - What is the realized price (or net selling price)

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