A cotton buyer will be making a purchase of 260,000 pounds of cotton on March 1. The buyer recognizes the potential price risk in the market and chooses to hedge as much of this purchase without over hedging. The appropriate futures contract is trading at $0.80/pound. His expected basis is - $0.03/pound. On March 1, the cotton buyer purchases 265,000 pounds of cotton in the cash market at a price of $0.90 pound. The appropriate futures contract is trading at $0.91/pound. 11. Determine his overall outcome from both the cash and futures transactions. Using the same begging portion of the above problem -- A cotton buyer will be making a purchase of 260,000 pounds of cotton on March / The buyer recognizes the potential price risk in the marker and chooses to hedge as much of this purchase without over hedging. The appropriate futures contract is trading ar $0.80/pound. His expected basis is -$0.03/pound Now consider: On March 1, the cotton buyer purchases 265,000 pounds of cotton in the cash market at a price of $0.70 pound. The appropriate futures contract is trading at S0.71/pound. 12. Determine his overall outcome from both the cash and futures transactions. A cotton buyer will be making a purchase of 260,000 pounds of cotton on March 1. The buyer recognizes the potential price risk in the market and chooses to hedge as much of this purchase without over hedging. The appropriate futures contract is trading at $0.80/pound. His expected basis is - $0.03/pound. On March 1, the cotton buyer purchases 265,000 pounds of cotton in the cash market at a price of $0.90 pound. The appropriate futures contract is trading at $0.91/pound. 11. Determine his overall outcome from both the cash and futures transactions. Using the same begging portion of the above problem -- A cotton buyer will be making a purchase of 260,000 pounds of cotton on March / The buyer recognizes the potential price risk in the marker and chooses to hedge as much of this purchase without over hedging. The appropriate futures contract is trading ar $0.80/pound. His expected basis is -$0.03/pound Now consider: On March 1, the cotton buyer purchases 265,000 pounds of cotton in the cash market at a price of $0.70 pound. The appropriate futures contract is trading at S0.71/pound. 12. Determine his overall outcome from both the cash and futures transactions