You are an oil producer. You see a December light sweet crude futures settling at $59 a
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Question:
You are an oil producer. You see a December light sweet crude futures settling at $59 a barrel. The contracts are for 1000 barrels each. You decide to hedge 10,000 barrels of your reserves with this futures contract.
Under each of the following scenarios, the table below shows the value of your futures position only (A), the value of your physical oil position only (B), and the total portfolio value (A + B) on the maturity day. Find A + B.
Maturity Day Spot Oil Price, $$ per bbl | |||
50 | 59 | 70 | |
Value of your position in the futures A | |||
Value of your physical position in oil B | 500,000 | 590,000 | 700,000 |
TOTAL A + B | = ? | = ? | = ? |
Related Book For
Accounting for Decision Making and Control
ISBN: 978-1259564550
9th edition
Authors: Jerold Zimmerman
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