On February 26th, the CFO of an airline company wants to hedge its exposure on Jet Fuel
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Question:
On February 26th, the CFO of an airline company wants to hedge its exposure on Jet Fuel Kerosene for the next 5 months. He is bundling up his risk into a July 2021 55,000 bbl. exposure. He selected two possible hedging futures and these are June and September futures on Crude Oil with a physical delivery in Cushing, Oklahoma.
What futures should he be doing and what should be his position (long or short?)
Is this hedge perfect? If not, what risk(s) is(are) involved in this hedge?
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