Significantly, this is India's first crude oil options contract and on its expiry, the open position will devolve into the respective underlying futures position
Instead, elevators should consider using basis-sale contracts and maintaining a short futures position
, which will protect them from most of the counterparty risk resulting from price swings.
In May, the FSA banned a former Morgan Stanley trader who built up a hefty unauthorised oil futures position
following a long liquid lunch, before hiding the deals overnight.
covered option writing--selling call options with the ownership of a long futures position
and put options with the ownership of a short futures position
His responsibilities include both assisting in the purchase of green coffee and management of S&D's futures position
If the market prices increase, higher ingredient costs will be effectively decreased due to the loss on the futures position
. Regardless of the directional change in price, the same price level has been established.
In order to cancel its futures position
at the end of each quarter, the company sells the same number of contracts that it bought in January for that particular quarter, thus canceling its position in a Peter-pay-Paul manner.
The gains and losses on the futures position
should mimic those of an index portfolio.
The short dashed line sloping down and to the left represents the loss potential of holding a long futures position
at $2.40 per bushel.
At all times during a hedge, your position in the futures position
will be opposite the position in the cash market.