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Hedging using futures Suppose a farmer is expecting that her crop of oranges will be ready for harvest and sale as 150 , 000 pounds

Hedging using futures

Suppose a farmer is expecting that her crop of oranges will be ready for

harvest and sale as150,000pounds of orange juice in3

months time. Suppose each orange juice futures contract is for15,000

pounds of orange juice, and the current futures price isF0=118.65cents-per-pound.

Assuming that the farmer has enough cash liquidity to fund

any margin calls, what is the risk-free price that she can guarantee herself?

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