Question: RDM will need to use 4 0 0 0 0 barrels of oil as part of an oil refinery startup and RDM wants to hedge

RDM will need to use

40000

barrels of oil as part of an oil refinery startup and RDM wants to hedge the risk of oil and price volatility by purchasing options. oil is currently trading at a spot price of $

80

a barrel with a put option of $

5.17

and a call option of $

6.27

for contracts at the money. Options on oil have a

1000

barrels contract size. What kind of option should RDM buy

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