Question 7 It is August. HotMetal a manufacturer in the North of the US has to heat its factories using (heating) oil, over the winter months November to March. HotMetal is currently forecasting 10% higher oil prices at $55 per barrel, rather than the markets forecast of $50. HotMetal is also forecasting low temperatures of 200F, rather than the consensus forecasts of 300F. Explain the relative merits of Hotmetal using specific futures and/or options contracts (on oil and temperature) in order to manage its fuel risks over the next 3 years. Assume cash settlement of all derivatives contracts