Question: Use the following data to answer the questions. Aviation Fuel Spot Price at end of September Gasoline Futures Price at the end of September for
Use the following data to answer the questions.
| Aviation Fuel Spot Price at end of September | Gasoline Futures Price at the end of September for the Contract maturing in mid-December | Crude Oil Futures Price at the end of September for the Contract maturing in mid-December | |
| 1997 | $0.5583 | $0.5046 | $19.48 |
| 1998 | $0.3774 | $0.3874 | $13.02 |
| 1999 | $0.6214 | $0.5573 | $19.87 |
| 2000 | $1.4762 | $0.9639 | $38.31 |
| 2001 | $0.6381 | $0.6059 | $22.13 |
| 2002 | $0.6571 | $0.5707 | $21.63 |
| 2003 | $0.5786 | $0.5215 | $18.93 |
| 2004 | $0.5333 | $0.5522 | $18.45 |
| 2005 | $0.5238 | $0.5102 | $17.28 |
| 2006 | $0.7000 | $0.6208 | $23.77 |
| 2007 | $0.5440 | $0.5991 | $21.12 |
| 2008 | $0.4500 | $0.4730 | $16.16 |
| 2009 | $0.6333 | $0.6758 | $24.14 |
| 2010 | $0.9607 | $0.8345 | $30.71 |
| 2011 | $0.6702 | $0.6418 | $23.68 |
| 2012 | $0.7976 | $0.7939 | $30.21 |
| 2013 | $0.7512 | $0.7875 | $29.40 |
Consider hedging the US$ cost of Qantas’s September-end 2013 aviation fuel purchases by establishing a position on 31/12/2012 in futures that mature in mid-December. Use the 1997 through 2012 data in the given table to determine:
(1) whether it would be better to hedge with gasoline or crude futures contracts that mature in December and
(2) how many contracts of the chosen type would you trade?
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