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rventurec rventurec
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2 years ago
Seth McDonald grows corn.  In May, he decides to sell 3 contracts, about half of his expected crop, for December delivery.  The contract price is $3.65 per bushel and the contract size is 5,000 bushels.  Shortly before the delivery date, corn is selling in the spot (immediate delivery) market for $3.85 per bushel.

▸ Seth will simply let the contract expire and sell his corn in the spot market.

▸ Seth can protect his profit by buying an offsetting contract.

▸ Seth has an opportunity loss of $3,000 because he must deliver corn at the lower price.

▸ Seth can hold on to his corn for several months and hope that the price to rises enough to offset his loss.
Textbook 
Fundamentals of Investing

Fundamentals of Investing


Edition: 14th
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PWT82PWT82
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2 years ago
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rventurec Author
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2 years ago
Thanks
avance37
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Yesterday
Correct Slight Smile TY
kiara23247843
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2 hours ago
This helped my grade so much Perfect
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