Cost of silver utilizing hedging strategy

Assignment Help Operation Management

Reference no: EM132230841

A dental firm has estimated its demand for silver to be 10,000 troy ounces during December and January. The firm is concerned that prices will rise in the interim and would like to lock in today’s price of $5.60 without purchasing the silver today. On June 15th, the CBOT’s December futures contract trades at $5.90. Since each contract controls 1000 troy ounces, the firm locks into a price of $5.90 by buying 10 contracts. In late November, the spot price has increased to $8.00 and the futures contract is priced at $8.45. At that time the firm sells the futures contract and purchases the silver at spot prices. Compare the cost of purchasing silver in November, unhedged position, with cost of silver utilizing a hedging strategy.

Reference no: EM132230841

Questions Cloud

Describing duties and how they fit into corporate structure : The corporate ethics officers job description will be 1-2 pages describing the duties and how they fit into the corporate structure.

What issues can arise from performance review : What issues can arise from a performance review by a direct manager? What issues can arise from a performance review by an unrelated HR person?

Identify two alternatives of getting the service : For your chosen service (e.g. white board markers), identify two alternatives of getting the service (e.g. brand A, brand B).

Behavioral heuristics-such as availability-anchoring : Behavioral heuristics, such as availability, anchoring, vividness, storage, conjunction fallacy, and representativeness, all reflect behavioral traits,

Cost of silver utilizing hedging strategy : Compare the cost of purchasing silver in November, unhedged position, with cost of silver utilizing a hedging strategy.

What is process analysis : What is Process Analysis? What is Process Improvement?

Different communities recognize different types of authority : Different communities recognize different types of authority. Some authorities are widely accepted, while others are accepted by a more limited group of people.

Why transportation costs in the supply chain : Explain HOW and WHY transportation costs in the supply chain are impacted by the NUMBER of warehouses you have.

Concerned with the human cost of unethical behavior : Why should business professionals be concerned with the human cost of unethical behavior?

User Account

All Pages