Question

A firm which plans to buy oil might anticipate a period of market volatility and wish...

A firm which plans to buy oil might anticipate a period of market volatility and wish to protect its expense against price fluctuations. The firm should:

A. enters a long position in oil futures or purchase a call option on oil.

B. enters a long position in oil futures or purchases a put option on oil.

C. enters a short position in oil futures or purchase a call option on oil.

D. enters a short position in oil futures or purchases a put option on oil.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The answer is

A. enters a long position in oil futures or purchase a call option on oil.

Long position in futures means the buying position while short position means the selling position.
Call Option is the right to buy the underlying asset at a specified price on a future date

Put Option is the right to sell the underlying asset at a specified price on a future date

Since the firm plans to buy oil.

It should enter into long position in futures or purchase a call option i.e. the right to buy

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A firm which plans to buy oil might anticipate a period of market volatility and wish...
A firm which plans to buy oil might anticipate a period of market volatility and wish to protect its expense against price fluctuations. The firm should: enters a long position in oil futures or purchase a call option on oil. enters a long position in oil futures or purchases a put option on oil. enters a short position in oil futures or purchase a call option on oil. enters a short position in oil futures or purchases a put option...
A firm which plans to buy oil might anticipate a period of market volatility and wish...
A firm which plans to buy oil might anticipate a period of market volatility and wish to protect its expense against price fluctuations. The firm should: A. enters a long position in oil futures or purchase a call option on oil. B. enters a long position in oil futures or purchases a put option on oil. C. enters a short position in oil futures or purchase a call option on oil. D. enters a short position in oil futures or...
A firm which plans to buy oil might anticipate a period of market volatility and wish...
A firm which plans to buy oil might anticipate a period of market volatility and wish to protect its expense against price fluctuations. The firm should: A. enters a long position in oil futures or purchase a call option on oil. B. enters a long position in oil futures or purchases a put option on oil. C. enters a short position in oil futures or purchase a call option on oil. D. enters a short position in oil futures or...
Discuss why the owner of an oil well might wish to buy put options for oil....
Discuss why the owner of an oil well might wish to buy put options for oil. As part of your discussion, briefly explain what is meant by put-call parity. Also explain how the Black-Scholes formula can be combined with put-call parity to estimate the market value of a European put option for oil. Note that you are not required to write down the Black-Scholes formula as part of the answer to this question.
A gold mining firm is concerned about short-term volatility in its revenues. Gold currently sells for...
A gold mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $2,550 an ounce, but the price is extremely volatile and could fall as low as $2,510 or rise as high as $2,590 in the next month. The company will bring 1,450 ounces of gold to the market next month. a. What will be the total revenues if the firm remains unhedged for gold prices of (i) $2,510, (ii) $2,550, and (iii) $2,590 an ounce?...
Problem 5 Ralph Lauren is a portfolio manager with Point72 Investments, a U.S.-based asset management firm....
Problem 5 Ralph Lauren is a portfolio manager with Point72 Investments, a U.S.-based asset management firm. Lauren is considering using options to enhance portfolio returns and control risk. He asks his junior analyst, Tommy Hilfiger, to help him. Hilfiger collected and summarize the relationship between a European call option and various factors that might impact the call option value in Table 1. He also collected the current market prices and data of selected instruments related to Lotus stock in Table...
We can express a firm in terms of a call/put option. In this context, the equity...
We can express a firm in terms of a call/put option. In this context, the equity in the firm is like the (a) with its strike price being the face value of debt. From another perspective, stockholders position is equivalent to holding a portfolio of a long 2 position of the (b), a short position of the (c), and a long position of the (d). Which of the following has the correct answers for blanks (a)-(d) in that order? A....
A gold mining firm is concerned about short-term volatility in its revenues. Gold currently sells for...
A gold mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $1,940 an ounce, but the price is extremely volatile and could fall as low as $1,850 or rise as high as $2,090 in the next month. The company will bring $3,000 ounces to the market next month.       a. What will total revenues be if the firm remains unhedged for gold prices of $1,850, $1,940, and $2,090 an ounce?     Gold price $1,850 $1,940...
A gold mining firm is concerned about short-term volatility in its revenues. Gold currently sells for...
A gold mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $1,690 an ounce, but the price is extremely volatile and could fall as low as $1,500 or rise as high as $1,810 in the next month. The company will bring $2,000 ounces to the market next month.       a. What will total revenues be if the firm remains unhedged for gold prices of $1,500, $1,690, and $1,810 an ounce?     Gold price $1,500 $1,690...
A gold mining firm is concerned about short-term volatility in its revenues. Gold currently sells for...
A gold mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $1,690 an ounce, but the price is extremely volatile and could fall as low as $1,500 or rise as high as $1,810 in the next month. The company will bring $2,000 ounces to the market next month.       a. What will total revenues be if the firm remains unhedged for gold prices of $1,500, $1,690, and $1,810 an ounce?     Gold price $1,500 $1,690...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT