Instructions: December 3: A farmer expects to harvest wheat in June. The July futures price is $8.77 /bushel and the expected basis in late June is $0.35/ bushel. Put options for July wheat are trading at $0.0875/ bushel for an $8.45 strike price, $0.3175/ bushel for an $8.90 strike price, and $0.60 bbushel for a $9.25 strike price. The farmer is considering the following market strategies: 1) Cash market only 2) Hedge using futures 3) Hedge using $8.45 options 4) Hedge using $8.90 options 5) Hedge using $9.25 options For each scenario below find the net realized price. You can assume: a) there are no commissions; b) the producer sells his wheat to the local elevator in the 3rd week of June - at around the time the options expire with no time value and no storage to consider; c) options or futures positions are initiated based on the above prices on December 3rd. Scenario 1: June 20: July futures $7.68/ bushel and local basis is $0.35/ bushel. 1. What is the net price using strategy 1 (cash)? 2. What is the net price using strategy 2 (hedging with futures)? 3. What is the net price using strategy 3 ( $8.45 options)? 4. What is the net price using strategy 4 (\$8.90 options)? 5. What is the net price using strategy 5($9.25 options)? 6. What was the best strategy in terms of net price received