H. Using Futures Options to Hedge (continued)

• Therefore:
  • 3 23/64% $100,000 = $3,359.38
  • Gain: $3,359.38 - $2,250.22 = $1,109.38 contract
  • Total Gain: $1,109.38 * 500 = $554,690
• 5. Net Hedge position would result in a gain of: $554,690 - $370,558 = $184,132
• 6. A perfect Hedge could have been achieved with a hedge ratio of:
  • Int: 370,558/gain: 1,109.38 = 334
  • 334/500 = 1 to .668

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