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# You have 1 million barrels of oil at a current price of S0 = \$25 per barrel. The current quoted futures price for delivery of oil in about 1 years'...

You have 1 million barrels of oil at a current price of S0 = \$25 per barrel. The current quoted futures price for delivery of oil in about 1 years’ time is F = \$26.25 per barrel. You want to hedge your spot oil position by using futures. The spot price of oil in 11½ months’ time is S1 = \$20 per barrel and the futures price (for delivery in 2 weeks) is F1 = 20.042 (\$ per barrel). What is the effective value of your hedged position in 11½ months’ time?

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