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The following question has to do with the NYMEX WTI Crude Oil futures contract. Specifications are: Contract Size 1,000 barrels Price Quotation US Dollars and
The following question has to do with the NYMEX WTI Crude Oil futures contract. Specifications are: Contract Size 1,000 barrels Price Quotation US Dollars and cents per barrel Minimum Price Fluctuation $0.01 per barrel Settlement Method Deliverable Maintenance Margin $5,300 Initial Margin $5,830 You own an oil field and hedge revenues. You produce WTI-grade oil in Weld County, Colorado. You plan to sell the oil in the open physical market in Cushing, OK (the delivery point for the NYMEX WTI Futures contract). It costs $8/bbl to transport oil to Cushing. You are going to produce 37,000 barrels in July and decide to use the July futures contract to hedge. Do you go long or short the contract? long short How many contracts do you enter into? How much margin do you initially post? Do you allow the contract to go into delivery? yes no
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