Suppose BP drills and extracts $110$ million gallons of crude oil and would like to ensure a price that they will sell that crude oil at in Dec $2024$

As an analyst at BP you decide to use the futures market to arrage the sale of the crude oil on $\frac{5}{1}\frac{?}{2024}$

Would BP go long or short crude oil futures?

What is the close price of the Dec $2024$ delivery WTI on $5/1/2024$

How many gallons crude are they selling

How many gallons in $1$ crude futures contract

how many contracts do they need to transact?

how many total barrels

What is the initial margin required at $9\mathrm{.}5\%$ of notional value

How much revenue are they locking in for their sale in WTI market?

What if they decided to sell in the Brent market

what is the close price of Dec $2024$ delivery Brent on $5/1/2024$

Since Brent crude is for the same size and

amount of crude the amount of contracts is the same

what is the revenue to sell the crude in the brent market

what is the Brent$-$WTI spread for Dec $2024$ contract

Your classmate from Rutgers works as an analyst at Mercuria, and is well versed in options for hedging.

She encourages you to conisder using options instead of futures to sell the BP crude oil in the WTI market.

You decide to do some analysis first...

Would BP go long or short crude oil options?

What is the strike price of the Dec $2024$ delivery crude on $\frac{5}{1}\frac{?}{2024},$

What is the premium for the option?

How many options are needed?

How much premium do you pay for the options?

How much profit are you locking it if you exercise your option at strike

Which is a better strategy for you to nominate to your Director?

Why?

You are a management consultant tasked with hedging firms hedge their commodity risk. You are currently consulting with a Polish firm on their natural gas requirments.

Poland just recently decided to diversify their natural gas away from Russia, they will be relying on other sources for their natural gas.

To reduce this risk many firms have hedged themselves in the futures market.

A Polish firm client needs to acquire $65,000$ therms for Dec $2024.$ And the closest, most liquid market is the UK NBP natural gas futures listed on the ICE Exchange

Would Polish firm be long or short natural gas?

What's the price for Dec $2024$ UK NBP natural gas on $5/1/2024$

how many therms are needed for delivery Dec $2024$

how many therms in $[1]$ Dec $2024$ contract

how many contracts do they need to transact

how much is the total cost upon delivery

Should we have used a forward contract instead and why?