Calculate the farmer gains and losses associated

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Reference no: EM132037366

A farmer produces 10,000 bushels of corn per season, which he sells in September. A good friend of his suggested he sells the whole production in the future's market. The settlement price of the corn futures contract for september is 403.4 (or 403'4 in CME parlance). The projection indicates the spot price of corn in September will either be 3.5 or 4.5 Dollars per bushel with equal pribability. The farmer is very weary of selling it all in the futures market. What proportion of the production should he sell in the futures market and should he take the Long or the Short? Calculate the Farmer's gains and losses associated with however many futures are needed. Future Lot size is 10,000 since he produces 10,000 each/per season.

Reference no: EM132037366

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