What is the net purchase price for the soybeans

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Reference no: EM132414101

It is December 2nd  May 20 soybean futures are trading at 905'6. An 860 May 20 soybean put is trading at 9'0 and an 860 May 20 soybean call is trading at 54'4. A 940 May 20 soybean put is trading at 49'6 and a 940 May 20 soybean call is trading at 15'6.

a) Suppose you will be buying soybeans in May 20 and you hedged your soybean purchase on Dec 2nd  with the May 20  soybean futures contract. When you buy your soybeans the May 20 soybeans futures are 933'2 and you pay 911'2 cash for the soybeans. How much is your basis? What is the net purchase price for the soybeans?

b) Suppose you set a fence for your soybean purchase on Dec 2nd. What is your maximum purchase price? What is your minimum purchase price? Use the basis in part a.

c) When you buy your soybeans, the May 20  soybeans futures are 933'2 and you pay 911'2 cash for the soybeans. You had set your fence in part b. What was your net gain/loss on your put? What was your net gain/loss on your call? What was your net purchase price?

Reference no: EM132414101

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