In December 2011, a company expects to buy 100,000 MMBtu
In December 2011, a company expects to buy 100,000 MMBtu of natural gas before the end of March 2012, but does not know exactly when. To hedge against volatile gas
prices, it implements a rolling forward hedge by taking a long position on 10 twomonth natural gas futures (only held for 1 month). One futures contract is for 10,000
MMBtu and is quoted in $ per MMBtu. The commodity is purchased in March 2012.What is total dollar gain/loss from the rolling hedge? Assume a hedge ratio of 0.8.