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A trader has decided to roll a short hedge forward until December to hedge a long position in corn inventory. The schedule below shows the
- A trader has decided to roll a short hedge forward until December to hedge a long position in corn inventory. The schedule below shows the dates on which trades are made and the prices.
- Determine the effective price at which the corn was sold on December 10.
- Explain whether the trader would have made more (or less) profit if it had not hedged its inventory position.
Date | Action | Price |
February 6 | Sell March Futures | $5.73 |
March 15 | Buy March Futures | $6.20 |
March 15 | Sell May Futures | $5.90 |
May 16 | Buy May Futures | $5.10 |
May 16 | Sell July Futures | $5.30 |
July 22 | Buy July Futures | $5.70 |
July 22 | Sell September Futures | $6.20 |
September 17 | Buy September Futures | $6.90 |
September 17 | Sell December Futures | $6.95 |
December 12 | Buy December Futures | $6.50 |
December 12 | Sell Cash Inventory | $6.45 |
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