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I import coffee from Colombia. I work for Starbucks. The firm that I import coffee from in Colombia is called Best Coffee Exports. Today, I
I import coffee from Colombia. I work for Starbucks. The firm that I import coffee from in Colombia is called "Best Coffee Exports." Today, I call "Best Coffee Exports" and ask if they would like to sell pounds of coffee for May delivery. "Best Coffee Exports" agrees and we settle on a price of May minus May Today, the May coffee futures contract is priced at Fast forward into the future where for purposes of this scenario, assume that there are two days left in the May contract trading period and the price of the May coffee futures contract is now I call "Best Coffee Exports" and we agree to settle our business based on the new market price of not taking into consideration the cent discount Assume I did everything by the book in terms of my hedging strategy, based on what we learned in class.
How much am I left with in US dollar terms as a combination of my gain or loss on the futures contract side of the equation combined with the amount of money I paid to "Best Coffee Exports"?
A
I now have the coffee and my books show a negative combined balance of $ I made $ on my futures trade and I paid the exporter $
B
I now have the coffee and my books show a positive combined balance of $ I made $ on my futures trade and I made $ from the exporter.
C
I now have the coffee and my books show a negative combined balance of $ I made $ on my futures trade and I paid the exporter $
D
I have now sold the coffee and my books show a positive combined balance of $ I made $ on my futures trade and the exporter paid me $
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