Mega Company believes the price of oil will increase in the coming months. Therefore, it decides to purchase call options on oil as a price-risk-hedging device to hedge the expected Increase in prices on an anticipated purchase of oil. On November 30, 20X1, Mega purchases call options for 12,000 barrels of oil at $38 per barrel at a premium of $2 per barrel with a March 1, 20X2, call date. The following is the pricing information for the term of the call: Futures Price Date November 30, 20x1 Spot Price $38 (for March 1, 20x2, delivery) $39 December 31, 20x1 39 40 March 1, 20x2 41 The information for the change in the fair value of the options follows: Date November 30, 20x1 December 31, 20x1 March 1, 20x2 Time Value $24,000 6,000 Intrinsic Value $ -0- Total Value $24,000 12,000 36,000 18,000 36,000 On March 1, 20X2, Mega sells the options at their value on that date and acquires 12,000 barrels of oil at the spot price. On June 1, 20X2, Mega sells the oil for $42 per barrel.