Question
XYZ Burger requires pork for producing its famous Meat-Flavored Sandwich. Frozen Pork Bellies futures contracts trade on the CME. Each contract calls for the delivery
XYZ Burger requires pork for producing its famous Meat-Flavored Sandwich. Frozen Pork Bellies futures contracts trade on the CME. Each contract calls for the delivery of 40,000 lbs. of USDA-inspected Pork Bellies. XYZ requires 40,000lbs on July 10. Today the spot price of pork bellies is $1.177 per pound and the July futures contract is trading for a price of $1.2055/lbs. Assume XYZ enters the appropriate position in July futures contracts to hedge its price risk. On July 10th it buys its pork from local pig farmers at $1.1655/lbs. and closes out the futures position. What is the net position of XYZ Burger on July 10?
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