Question
You are a small oil trading firm with limited financial reserves, and have an agreement to sell 1,000,000 barrels oil to a company in Indonesia
You are a small oil trading firm with limited financial reserves, and have an agreement to sell 1,000,000 barrels oil to a company in Indonesia in six months at a fixed price in Indonesian Rupiah, and you already have a purchase contract for the oil with a US supplier to meet that obligation (the contract is in dollars). What kind of contracts will you use: Rupiah futures, Oil futures, or both? And what are the greatest risk(s) you confront, once you are using futures contracts to hedge this transaction?
Group of answer choices
Oil futures; Oil prices increase
Rupiah futures; Rupiah appreciates
Oil futures; Oil prices decrease
Rupiah futures; Rupiah depreciates
None of these answers.
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