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A grain merchant buys 10,000 bushels of wheat on 1st October for a price of $4.30 per bushel. He hedges them by selling that day a 1st December wheat…

A grain merchant buys 10,000 bushels of wheat on 1st October for a price of $4.30 per bushel. He hedges them by selling that day a 1st December wheat futures contract at a price $4.50 per bushel. On 1st November the merchant sells the total number of bushels of wheat in the physical market for $4.20 per bushel and that day he buys a 1st December futures contract at $4.30 per bushel. Prepare the Hedging Table for the grain merchant including the basis, the net gain or loss in the spot and futures markets, and the net hedged selling price.

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