What is abc profit or loss on the option

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1. The Yummy Chocolate Company ("YCC") wishes to hedge its cocoa exposure for the next 90 days using futures. The cash price of cocoa today is $2,546 per metric ton. The 90-day futures price for cocoa today is $2,625 per metric ton. At expiration of the futures contract in 90 days, the cash price of cocoa is $2,590 per metric ton. How will YC hedge its exposure? Show YCC's final cocoa cost after a) cash purchas of cocoa; b) settling of futures position.

2. ABC purchases a call option at a strike price of $17.44. At expiration the underlying is trading at $17.23. Does ABC exercise or abandon the option? Ignoring the option premium, what is ABC's profit or loss on the option?

3. Refer to 2. At expiration, the underlying is trading at $17.77. Does ABC exercise or abandon the option? Ignoring the option premium, what is ABC's profit or loss on the option?

Reference no: EM133119000

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