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An investor holds 100,000 shares and hedges their position by selling futures at $20.50. As the share price declines, so does the futures price. Calculate
An investor holds 100,000 shares and hedges their position by selling futures at $20.50. As the share price declines, so does the futures price. Calculate the net hedging benefit using the information below. Information: Simple hedge ratio: 1,000 contracts Purchase price of stock: $20 Current stock price: $18 Shares purchased: 100,000 Contract multiplier: 100 Initial futures price: $20.50 Current futures price: $18
$125,000
$25,000
There is no hedging benefit
$50,000
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