Suppose that after graduation, you take a job with an Oklahoma oil company. Youboss indicates that he expects November 2020 production to be 7,000 bbl and hwould like you to manage the company's price risk.The current cash price is $42.06/bbl and the December 2020 WTI futures price$42.75/bbl. The contract size for WTI crude is 1,000 bbl. You hedge the entireexpected production in the futures market.In November 2020, the cash price rises to $44.28/bbl and the December 2020futures price rises to $44.35/bu.Assume transaction fees of $15 per roundtrip per futures contract and a hedge rof 1.0 when answering the questions below. Round to the nearest whole numbercontracts.Question 1Did you first go long or short futures to initiate your hedge?

For hedging, if we go long that means we have got the right to buy the underlying asset at…

Answered: Suppose that after graduation, you take…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Suppose that on September 05, 2021, a company takes a short position in one April 2022 live - cattle futures contract. One contract is for the delivery of 50,000 pounds of cattle. The initial margin for each contract is $\$ 3, 000 $ and the maintenance margin is $\$ 2,000 $. The futures price (per pound) is 180.00 cents when it enters into the contract.(a) If the company receives a margin call at the end of the third day to deposit a variation margin of $1250, what is the settlement price at the end of the day?
A trader bought two July futures contracts. Each contract is for the delivery of 1,000 barrels. The initial margin is $11,250 per contract and the maintenance margin is $9,000. Calculate the daily gain and loss and margin account balance from April 13, 2020 to April 15, 2020 and explain when the investor will receive a margin call and how much does he need to top up?
Suppose that March oil futures have the price of $65/barrel, and the size of the contract is 1,000 barrels. When the contract matures in March, what will be the profit of a single long futures contract if the spot price is $68.50/barrel? Only typed Answer and give Answer fast
June 2019 Mexican peso futures contract has a price of $0.05197 per MXN. You believe the spot price in June will be 0.05831 per MXN a. What speculative position would you enter into to attempt to profit from your beliefs? O Short position O Long Position b. Calculate your anticipated profits, assuming you take a position in three contracts. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Anticipated profit c. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes? (A Negative value should be indicated with a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number)
A farm that produces corn is looking to hedge their exposure to price fluctuations in the future. It is now May 15th and they expect their crop to be ready for harvest September 30th. You have gathered the following information: Bushels of corn they expect to produce 44,000 May 15th price per bushel $3.08 Sept 30 futures contract per bushel $3.22 Actual market price Sept 30 $3.37 Required (round to the nearest dollar): Calculate the gain or loss on the futures contract and net proceeds on the sale of the corn. Net gain or loss on future $Answer Sell the corn $Answer Net $Answer
MHF believes the price of Amazon is going to fall substantially over the next 8 months. MHF uses an option (use the January 2024 contract with an exercise price of $95) to hedge the risk as it owns 10 million shares of Amazon. It will hedge exactly 50% of its position. Identify the type of option most likely used. Show the total position (please put this in a table) of the spot and derivative at expiration if the price of Amazon at expiration is a) $62; b) $77; c) $93; d) $112; e) $128. Only typed answer
Please answer it with no descriptions or details, with the question numbers and answers, the exact way it should go on according to the red regulations, thank you!
3. Suppose you are a derivatives trader specializing in creating customized commodity for- ward contracts for clients and then hedging your position with exchange-traded futures contracts. Your latest position is an agreement to deliver 100,000 gallons of unleaded gas- oline to a client in three months. a. Explain how you can hedge your position using gasoline futures contracts. b. If the only available gasoline futures contracts call for the delivery of 42,000 gallons and mature in either two or four months, describe the nature of the basis risk involved in your hedge.

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