Assume you are a soybean producer. On June 20, you decide to hedge the sale of...
Assume you are a soybean producer. On June 20, you decide to hedge the sale of a portion of your expected bean crop for delivery in the fall by entering a November futures contract at $7.20 per bushel. By October, futures price is $6.31 per bushel. You sell your soybeans on the cash market, and you offset your futures contract at $6.31 per bushel. What is your gain or loss on the futures contract (in dollars per bushel)? Put your answer in the form of a positive (gain) or negative (loss) number.
Homework Answers
November future contract value is $7.20 per bushel
By October future price is $6.31 per bushel
He is long on soyabean futures and expects price increase in future contract but by October future price decreases to $6.31 per bushel
Therefore price of future contract decreases hence he books loss worth $6.31-$7.2=-$0.89 per bushel.
Our answer is -$0.89 per bushel (Incurred loss)
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