MRKT 325 Study Guide - Comprehensive Final Exam Guide - Spot Contract, Grain Elevator, Futures Contract
Document Summary
Module 1 (b: a closer look into basis and futures hedging, changes in spot and futures prices, implications of changes in basis. Scenario a: now we are in november and the producer is ready to deliver her soybeans. Today (november) we have: spot price in her local cash market = . 60/bu, futures price for november delivery = . 00/bu, producer wants to offset her futures contract and sell/deliver grain to her local grain elevator. . 00/bu: gain in the futures market = Another look into the realized price: price received in the spot market today (november) = . 60/bu, gain in the futures market = sh. 22/bu, sold on june 19 @ Spot price turns out to be lower than projected, thus you lose sh. 22/bu. spot loss = futures gain. Both spot and futures prices went down by the same amount. both moved at the same speed difference between them stayed the same.
