Question
On April 1, the price of July NYMEX Division Henry Hub natural gas futures is $2.50 per million Btus and July Entergy electricity futures is
On April 1, the price of July NYMEX Division Henry Hub natural gas futures is $2.50 per million Btus and July Entergy electricity futures is $25 per megawatt hour (Mwh). On July 28, the delivery date, the natural gas futures is $2.75 and the electricity futures is $23. The heat rate of the generating unit is approximately 10,000. Which of the following is FALSE?
a. Between April 1 and July 28, you will make $7,500 on the natural gas futures
b. To hedge the spark spread, you need to sell four Entergy electricity futures and buy three Henry Hub natural gas futures
c. Between April 1 and July 28, you will make $7.55 per MWh total profit
d. Between April 1 and July 28, you will make $5,888 on the electricity futures
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