Mega Company believes the price of oll 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 15,000 barrels of oil at $32 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: Date November 30, 20x1 Spot Price $32 Futures Price (for March 1, 20x2, delivery) $33 December 31, 20x1 33 34 35 March 1, 20x2 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 $30,000 6,000 Intrinsic Value Total Value $ - $30,000 15,000 21,000 45,000 45,000 On March 1, 20X2, Mega sells the options at their value on that date and acquires 15,000 barrels of oil at the spot price. On June 1, 20X2, Mega sells the oil for $36 per barrel.