Suppose that last month you purchased ten January crude oil futures contracts at a quoted price of 53.88. These contracts are based on 1,000 barrels and quoted in dollars per barrel. Assume the actual price per barrel is $56.20 in January. How much did you gain or lose by hedging your position?

Question

Quizplus · Accepted Answer

The gain is calculated by subtracting the purchase price from the actual price in January and then multiplying by the number of barrels and contracts. The calculation is ($56.20 - $53.88) * 1,000 barrels * 10 contracts = $2.32 * 10,000 = $23,200.

Suppose That Last Month You Purchased Ten January Crude Oil