Question
Please show all work, thank you Today is September. Chesapeake Energy, a major natural gas producer, takes a short position in 42 December Henry Hub
Please show all work, thank you
Today is September. Chesapeake Energy, a major natural gas producer, takes a short position in 42 December Henry Hub natural gas futures contracts at a futures price of $2.91 per million British thermal units (mmBtu.) The objective is to hedge price risk of future sales of natural gas to utility companies. The spot price of natural gas currently is $2.88 per mmBtu. In November, the Exxon Mobil offsets (i.e., closes out) its futures position by taking a long position in the same number of contracts at a futures price of $2.89 per mmBtu. The spot price in November is $0.15 per mmBtu above the futures price. What is Cheasapeake Energys TOTAL gain or loss on its futures position? Ignore transactions costs. The size of the Henry Hub natural gas futures contract is 10,000 mmBtu
(Answer $8,400)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started