Risk management and hedging strategy using futuresyou have

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Reference no: EM13381091

Risk Management and Hedging Strategy Using Futures

You have been hired as a Financial Analyst at "Burger Donalds" and scheduled to begin on July 1, 2012. Your first Assignment involves the Futures Markets. The Burger Production Manager informs that he wants 5 million bushels of wheat on December 1, 2012 of the year to ensure continued and uninterrupted production of Super Burgers. You glance through the Wall Street Journal on July 1 and observe these prices.

Spot Price of Wheat on July 1 (Per Bushel) $7.52

July Wheat futures price (Delivery on July 31) $7.54

August Wheat futures price (Delivery on Aug 31) $7.55

October Wheat futures price (Delivery on Oct 31) $7.56

November Wheat futures price (Delivery on Nov 30) $7.58

From Historical company records you know that if you buy the wheat ahead of the required time you can store it at a cost of 2 cents per bushel per month. Outline all your strategies (at least six!) and their implications.

Reference no: EM13381091

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