You are a dealer in agricultural products including sugar. It is September $26$ and the spot

price of sugar is $$0\mathrm{.}0479$ per pound. You hold $112,000$ pounds of sugar. You are worried

about the market so you decide to hedge.

a$.$ A January futures contract on sugar is trading at $$0\mathrm{.}0550$ per pound. Contract

size is $112,000$ pounds. What should your futures position be if using the

January contract?

b$.$ On December $10$ you close your position out. The spot price is $$0\mathrm{.}0574$ and the

January futures price is $$0\mathrm{.}0590.$ Draw a time line of your strategy and evaluate

its performance by determining the change in spot and change in futures

positions.

c$.$ Was your hedge successful? Explain by looking at the net hedged price at close.