Henry Hub Natural Gas Futures Data

Trade Date: Wednesday, 07/07/2016

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
OCT 16	2.725	2.743	2.665	2.686	-.041	2.676	142,945	213,544
NOV 16	2.855	2.869	2.802	2.815	-.031	2.811	66,617	207,841
DEC 16	3.066	3.086	3.039	3.048	-.013	3.046	34,300	75,412
JAN 17	3.196	3.213	3.169	3.177	-.012	3.175	36,496	129,657
FEB 17	3.196	3.219	3.175	3.182	-.012	3.182	5,807	31,902
MAR 17	3.154	3.178	3.139	3.144	-.014	3.144	11,214	89,526

Trade Date: Friday, 09/09/2016

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
OCT 16	2.810	2.844	2.783	2.797	-.009	2.797	154,144	192,257
NOV 16	2.911	2.944	2.880	2.889	-.027	2.890	93,799	218,404
DEC 16	3.138	3.168	3.107	3.116	-.025	3.119	36,592	76,740
JAN 17	3.261	3.289	3.228	3.241	-.023	3.243	35,175	134,375
FEB 17	3.271	3.289	3.231	3.242	-.023	3.246	9,761	33,135
MAR 17	3.227	3.247	3.189	3.201	-.022	3.205	14,251	90,487

Spot Data:

2016/09/06 2.820

2016/09/07 2.820

2016/09/08 2.840

2016/09/09 2.920

Date	Futures Price	Spot Price
2-Sep-16	$2.90	$2.85
1-Sep-16	$2.91	$2.91
31-Aug-16	$3.00	$2.94
30-Aug-16	$2.95	$2.92
29-Aug-16	$3.01	$2.95
26-Aug-16	$3.03	$2.87
25-Aug-16	$3.01	$2.86
24-Aug-16	$2.97	$2.77
23-Aug-16	$2.92	$2.71
22-Aug-16	$2.84	$2.74
19-Aug-16	$2.78	$2.64
18-Aug-16	$2.87	$2.71
17-Aug-16	$2.83	$2.71
16-Aug-16	$2.83	$2.71
15-Aug-16	$2.81	$2.71
12-Aug-16	$2.80	$2.70
11-Aug-16	$2.79	$2.67
10-Aug-16	$2.80	$2.73
9-Aug-16	$2.84	$2.75
8-Aug-16	$2.94	$2.83

3. Devon Energy, a gas processing company, expects to pay for 400,000 mmBtu of natural gas at a close of day on Friday, September9. They want to hedge their position with Henry Hub natural gas futures. Assume that they enter into the position at close of day on Tuesday, September 6th. The size of one natural gas futures is 10,000 mmBtu. Futures and spot data are provided in the file HW1_data.doc. a. Describe the position they should enter (long or short, contract month) b. Compute the hedge ratio using data from Data hwl.xls file. How many contracts do they need to buy or sell? Document the price gain or loss every day that their position is open. their payment? c. d. e. f. What is the effective cost per mmBtu