As a marketing Director of a large PO refinery, you anticipate that you would require 10,000 of large CPO as your raw material in November 2019, in view of festive seasons. Today, early August 2019, physical CPO is trading at RM1,660 per metric tonne while September, October, November and December 2019 CPO futures are trading at RM1,700, RM1,730, RM1,770 and RM1,800 respectively.

In anticipation of rising prices, establish your hedging strategy by showing its benefits as measured by its effective price, assuming that in early November 2019, futures closed at RM1,820 and RM1,830 for November and December 2019 respectively, and cash price of RM1,760.