1. Your utility company will need to buy 200,000 barrels of oil in 10 days time, and it is worried about fuel costs. Suppose futures contracts with expiration in exactly 10 days are available each for 1000 barrels of oil, at the current futures price of $60 per barrel.

1. How many contracts do you need to hedge your commodity risk? What kind of position in futures contracts (short or long) do you need to take?
2. Suppose futures prices change each day as follows:

Day
1	2	3	4	5	6	7	8	9	10
$61	$63	$62	$59	$58	$57	$60	$62	$63	$65

What is the mark-to-market profit or loss (in dollars) that you will have in each of the first four days?

3. If the initial margin is $1 mln and maintenance margin is $750,000, would you receive a margin call? If yes, when? What happens after an investor receives a margin call?