Presentation is loading. Please wait.

Presentation is loading. Please wait.

Commodity Hedging-Short SPOT MARKETFUTURES MARKET 5/1/99 GROWING GRAIN 5000 $2.00 5/1/99 SELL CONTRACT 5000 $2.10 8/1/99 SELL GRAIN SPOT 5000.

Published byAshley Bell Modified over 8 years ago

Similar presentations

Presentation on theme: "Commodity Hedging-Short SPOT MARKETFUTURES MARKET 5/1/99 GROWING GRAIN 5000 $2.00 5/1/99 SELL CONTRACT 5000 $2.10 8/1/99 SELL GRAIN SPOT 5000."— Presentation transcript:

1 Commodity Hedging-Short SPOT MARKETFUTURES MARKET 5/1/99 GROWING GRAIN 5000 BU. @ $2.00 5/1/99 SELL CONTRACT 5000 BU. @ $2.10 8/1/99 SELL GRAIN SPOT 5000 BU. @ $2.20 8/1/99 BUY CONTRACT 5000 BU. @ $2.28 GAIN = 5000 BU. X $.20 = $1000 LOSS = 5000 BU. X $.18 = $900 NET = $100

2 Commodity Hedging-Short SPOT MARKETFUTURES MARKET 5/1/99 GROWING GRAIN 5000 BU. @ $2.00 5/1/99 SELL CONTRACT 5000 BU. @ $2.10 8/1/99 SELL GRAIN SPOT 5000 BU. @ $1.80 8/1/99 BUY CONTRACT 5000 BU. @ $1.80 LOSS = 5000 BU. X $.20 = $1000 GAIN = 5000 BU. X $.30 = $1500 NET = $500

3 Commodity Hedging-Long SPOT MARKETFUTURES MARKET 5/1/99 SHORT GRAIN 5000 BU. @ $2.00 5/1/99 BUY CONTRACT 5000 BU. @ $2.10 8/1/99 BUYS GRAIN SPOT 5000 BU. @ $1.80 8/1/99 SELL CONTRACT 5000 BU. @ $1.80 GAIN = 5000 BU. X $.20 = $1000 LOSS = 5000 BU. X $.30 = $1500 NET = -$500

4 Commodity Hedging-Long SPOT MARKETFUTURES MARKET 5/1/99 SHORT GRAIN 5000 BU. @ $2.00 5/1/99 BUY CONTRACT 5000 BU. @ $2.10 8/1/99 BUYS GRAIN SPOT 5000 BU. @ $2.30 8/1/99 SELL CONTRACT 5000 BU. @ $2.35 LOSS = 5000 BU. X $.30 = $1500 GAIN = 5000 BU. X $.25 = $1250 NET = -$250

5 Bond Prices Bond prices are quoted as follows: 98-23 The “23” is 23/32nds of $1.00 23/32 =.719 Therefore, 98-23 is equivalent to $ 987.19 Similarly, 96-16 is $965.

6 Interest Rate Hedging-Long CASH MARKETFUTURES MARKET 5/1/99 SHORT BONDS TBOND @ 97-22 5/1/99 BUY 1 CONTRACT TBOND @ 97-29 8/1/99 BUY BONDS CASH TBOND @ 98-11 8/1/99 SELL CONTRACT TBOND @ 98- 17 LOSS = $11.77 @ Bond GAIN = $6.25 @ Bond NET = $5.52/ Bond X 100 Bonds = $552.00

7 Interest Rate Hedging-Long CASH MARKETFUTURES MARKET 5/1/99 SHORT BONDS TBOND @ 97-22 5/1/99 BUY 1 CONTRACT TBOND @ 97-29 8/1/99 BUY BONDS CASH TBOND @ 97-11 8/1/99 SELL CONTRACT TBOND @ 97-18 GAIN = $3.44 @ Bond LOSS = $3.44 @ Bond NET = 0

8 Interest Rate Hedging-Short CASH MARKETFUTURES MARKET 5/1/99 HOLD BONDS TBOND @ 97-22 5/1/99 SELL 1 CONTRACT TBOND @ 97-29 8/1/99 MARK TO MARKET TBOND @ 98-11 8/1/99 BUY CONTRACT TBOND @ 98- 17 GAIN = $3.44 @ Bond LOSS = $6.25 @ Bond NET = $2.81/ Bond X 100 Bonds = $281.00

9 Interest Rate Hedging-Short CASH MARKETFUTURES MARKET 5/1/99 HOLD BONDS TBOND @ 97-22 5/1/99 SELL 1 CONTRACT TBOND @ 97-29 8/1/99 MARK TO MARKET TBOND @ 97-00 8/1/99 BUY CONTRACT TBOND @ 97- 04 LOSS = $6.88 @ Bond GAIN = $7.81 @ Bond NET = $.93/ Bond X 100 Bonds = $93.00

Download ppt "Commodity Hedging-Short SPOT MARKETFUTURES MARKET 5/1/99 GROWING GRAIN 5000 $2.00 5/1/99 SELL CONTRACT 5000 $2.10 8/1/99 SELL GRAIN SPOT 5000."

Similar presentations

Futures Introduction. Futures Usage Usage Hedgers Hedgers Speculators Speculators Trading Environment Trading Environment Open-Outcry Auction Open-Outcry.

Futures Introduction. Futures Usage Usage Hedgers Hedgers Speculators Speculators Trading Environment Trading Environment Open-Outcry Auction Open-Outcry.
15-1 Chapter 15 Bond Futures. 15-2 Treasury Bond Futures Delivery date at least 15 years n0 $100,000 par per contract.

15-1 Chapter 15 Bond Futures Treasury Bond Futures Delivery date at least 15 years n0 $100,000 par per contract.
Getting In and Out of Futures Contracts By Peter Lang and Chris Schafer.

Getting In and Out of Futures Contracts By Peter Lang and Chris Schafer.
De Luna Ulpo Yumul. Recap Recap What if?What if? ?

De Luna Ulpo Yumul. Recap Recap What if?What if? ?
Copyright 2014 by Diane S. Docking 1 Forwards & Futures CME Futures: How it all works:

Copyright 2014 by Diane S. Docking 1 Forwards & Futures CME Futures: How it all works:
AGEC 420, Lec 8 1 AGEC 420 Hedging examples AGEC 420, Lec 8 2 Hedging Expected (net forward) price: =futures + expected basis If basis is at the expected.

AGEC 420, Lec 8 1 AGEC 420 Hedging examples AGEC 420, Lec 8 2 Hedging Expected (net forward) price: =futures + expected basis If basis is at the expected.
Risk Management u Major thrust in agriculture u Change in government programs u Management is not avoidance –No risk, no reward –Too much risk and you.

Risk Management u Major thrust in agriculture u Change in government programs u Management is not avoidance –No risk, no reward –Too much risk and you.
Vicentiu Covrig 1 Futures Futures (Chapter 19 Hirschey and Nofsinger)

Vicentiu Covrig 1 Futures Futures (Chapter 19 Hirschey and Nofsinger)
HOW CASH PRICE AND BASIS AFFECT HEDGING OUTCOMES Larry D. Makus and Paul E. Patterson University of Idaho Department of Agricultural Economics & Rural.

HOW CASH PRICE AND BASIS AFFECT HEDGING OUTCOMES Larry D. Makus and Paul E. Patterson University of Idaho Department of Agricultural Economics & Rural.
Saunders and Cornett, Financial Institutions Management, 4th Edition 1 “My interest is in the future because I am going to spend the rest of my life there.”

Saunders and Cornett, Financial Institutions Management, 4th Edition 1 “My interest is in the future because I am going to spend the rest of my life there.”
© 2004 South-Western Publishing 1 Chapter 11 Fundamentals of Interest Rate Futures.

© 2004 South-Western Publishing 1 Chapter 11 Fundamentals of Interest Rate Futures.
Futures Hedging Examples. Hedging Examples  T-Bills to Buy with T-Bill Futures  Debt Payment to Make with Eurodollar Futures  Futures in Portfolio.

Futures Hedging Examples. Hedging Examples  T-Bills to Buy with T-Bill Futures  Debt Payment to Make with Eurodollar Futures  Futures in Portfolio.
© K.Cuthbertson and D.Nitzsche 1 Version 1/9/2001 FINANCIAL ENGINEERING: DERIVATIVES AND RISK MANAGEMENT (J. Wiley, 2001) K. Cuthbertson and D. Nitzsche.

© K.Cuthbertson and D.Nitzsche 1 Version 1/9/2001 FINANCIAL ENGINEERING: DERIVATIVES AND RISK MANAGEMENT (J. Wiley, 2001) K. Cuthbertson and D. Nitzsche.
© K. Cuthbertson and D. Nitzsche Figures for Chapter 1 DERIVATIVES : AN OVERVIEW (Financial Engineering : Derivatives and Risk Management)

© K. Cuthbertson and D. Nitzsche Figures for Chapter 1 DERIVATIVES : AN OVERVIEW (Financial Engineering : Derivatives and Risk Management)
Lecture 8.  Underlying Assets (sample) S&P 500 NYSE Composite Index Major Market Index (MMI) (CBOE) Value Line Index Why Are They Traded? 1. Arbitrage.

Lecture 8.  Underlying Assets (sample) S&P 500 NYSE Composite Index Major Market Index (MMI) (CBOE) Value Line Index Why Are They Traded? 1. Arbitrage.
Chapter 13 Financial Derivatives. © 2004 Pearson Addison-Wesley. All rights reserved 13-2 Hedging Hedge: engage in a financial transaction that reduces.

Chapter 13 Financial Derivatives. © 2004 Pearson Addison-Wesley. All rights reserved 13-2 Hedging Hedge: engage in a financial transaction that reduces.
Investing: Taking Risks With Your Savings.  Part Owner of Corporation  Funds for expansion  Stock Returns ◦ Stockholders ◦ Dividend, return on investment.

Investing: Taking Risks With Your Savings.  Part Owner of Corporation  Funds for expansion  Stock Returns ◦ Stockholders ◦ Dividend, return on investment.
FUTURES DEFINITION Futures (forward) contracts are agreements between two agents where one agrees to purchase and the other to sell (deliver) a given amount.

FUTURES DEFINITION Futures (forward) contracts are agreements between two agents where one agrees to purchase and the other to sell (deliver) a given amount.
Economics 330 Money and Banking Lecture 18 Prof. Menzie Chinn TAs: Chikako Baba, Deokwoo Nam.

Economics 330 Money and Banking Lecture 18 Prof. Menzie Chinn TAs: Chikako Baba, Deokwoo Nam.
Lecture Presentation Software to accompany Investment Analysis and Portfolio Management Seventh Edition by Frank K. Reilly & Keith C. Brown Chapter 22.

Lecture Presentation Software to accompany Investment Analysis and Portfolio Management Seventh Edition by Frank K. Reilly & Keith C. Brown Chapter 22.

Similar presentations

Ads by Google