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What would be the cost of making your exposure Delta Neutral using a one year at-the-money Call Option on a single Diesel Fuel Contract exercisable
What would be the cost of making your exposure Delta Neutral using a one year at-the-money Call Option on a single Diesel Fuel Contract exercisable only at the end of one year? What would be the price of hedging the entire exposure for one year?
Risk Free Rate 2%
Number of Vehicles 100
Kilometers per Vehicle per Annum 250,000
Litres per 100 km : 30
Total Kilometers for Fleet 25,000,000.0
Litres consumed for Fleet 7,500,000.0
Fuel Oil Contract Size Litres 200,000
Annual Required Contracts 37.50
Fuel Oil Volatility 30%
Current Spot Price per Litre $ 0.40
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