hedging using crude_palm_oil
TRANSCRIPT
Hedging using Crude Palm Oil.
Suppose in February, a palm oil producer anticipates he will have 250 tonnes of CPO ready for sale in two months’ time. He would like to set a price for his produce and thereby introduce some financial stability into his business. The current price of CPO at auction is RM1,260 per tonne while April CPO futures are currently trading at RM1275. Outline the strategy of hedging by the producer.
Spot/cash market Futures MarketFebruary
Producer expects to have 250 tonnes CPO for sale in April.
CPO price RM1,260
February
April futures price is RM1275/tonne
Position:?
No. of contract: ?# 1 contact= 25 tonnes
Total value of futures contract?
April
CPO price is RM1255/ tonne
Value of CPO?
Net value including profit/loss in futures?
Effective price per tonne?
April
What is April futures price?
Position:?
Total value of futures contract?
Futures profit/loss?