Option on futures as opposed to pure futures hedge

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Find the value of a June 2017 call option on Crude Oil futures with a strike price of $55. Supposing you buy this call option graph the payoffs associated with the purchase, and explain how this option may be a better way to hedge against your exposure to oil costs. What is the advantage of an option on futures as opposed to a pure futures hedge? What is the disadvantage of this? Use the prior settlement pricing for this problem, and state the date you used.

Reference no: EM131554709

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