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Futures+Market+Players

Futures+Market+Players - HEDGING PROBLEM Farmer Jane as...

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Unformatted text preview: HEDGING PROBLEM Farmer Jane as trying to decide if she should breed her sows It cost Farmer Jane about $0. 571th to raise each hog to market weight She estimates that she wilt have about 500 hogs at an average weight of 240 the each ready to market the end of December December futures for hogs currently trade at 74. 800 cents per pound. Contract size for Hogs rs 40, 000 the Farmer Jane decides to hedge her hogs a. What transaction will she make in the futures market? in December hogs are trading at 52.25 cents per pound. Jane offsets her futures position and at the same time seils her hogs in the cash market. Assume that cash and futures prices are the same and that Jane pays no commissions. b. What is Jane’s total profit or loss? 0. What is her profit or loss in the cash market? d. What is her profit or loss in the futures market? e. 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