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Use the information provided below: Date Oct. 2017 Feb. 2018 Aug. 2018 Feb. 2019 Aug. 2019 Spot price 372.00 369.00 365.00 377.00 388.00 Mar.
Use the information provided below: Date Oct. 2017 Feb. 2018 Aug. 2018 Feb. 2019 Aug. 2019 Spot price 372.00 369.00 365.00 377.00 388.00 Mar. 2018 futures price 372.30 369.10 Sept. 2018 futures price 372.80 370.20 364.80 Mar. 2019 futures price 370.70 364.30 376.70 Sept. 2019 futures price 364.20 376.50 388.20 It is currently August 2018 and you are interested in hedging the one- time sale of 1 million pounds of copper in Feb 2019. Assume you hedge the entire 1 million pound sale. 1) What position would you take (be specific)? Detail the specific actions you will take from today (August 2018 thru the sale of the copper) 2) Does the basis strengthen or weaken during the life of the hedge (show calculations)? Does this hurt or help your position? Explain. 3) What is the realised sales price per pound of copper? Show in terms of the spot price and the gain/loss on the futures position.
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