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Southern Fuel has an inventory of 756,000 gallons of heating oil that it expects to maintain over the next 60 days. The futures contracts on
Southern Fuel has an inventory of 756,000 gallons of heating oil that it expects to maintain over the next 60 days. The futures contracts on heating oil are based on 42,000 gallons. If the firm wishes to fully hedge its inventory, what position should the firm take in heating oil futures contracts? Given the exact same circumstances and information, how could Southern Fuel "speculate" with its business inventory?
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