Hedging Example (continued)

• 1. Producer buys Platinum futures at $205. Assume spot price increases in 8 months to $280/ounce. And the price of the contract has increased to $325/ounce. One contract represents 50 ounces.
• 2. Profit:
  • a. In the contract:
  • $325 - $205 = $120 * 50 = $6000
  • b. In the spot market:
  • $280 - $180 = $100 * 50 = ($5000)

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