Question
Another strategy may be purchasing call options. If Delta can buy call options today, to buy fuel in the next 6-12 months, they could also
Another strategy may be purchasing call options. If Delta can buy call options today, to buy fuel in the next 6-12 months, they could also protect themselves against a rise in fuel prices This may be a safer option for Delta, because there is no obligation to exercise the contractFor example, if fuel prices end up being lower than the strike price of the option, they can choose not to exercise the option and just purchase the fuel without the option(Other factors would be considered as well)\
Using the above information please answer the following questions?
Which strike options would you buy? How many?
If prices end up lower they would never exercise, so do not say they can choose.they would not buy.
Contrast the two strategies and make a recommendation.
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