State the net cash position with and without

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Reference no: EM133557800

Imagine you are managing a copper mine and plan to sell 800 metric tons of copper 3 months from today. Since you do not know the future price of copper, you are considering employing a put protection strategy to manage your price risk. A put option giving you the right to sell 1 metric ton of copper for $6.40 per kilogram 3 months from now costs $360. This is the option you want to use.

State the net cash position with and without the put protection, if the spot price of copper in 3 months' time turned out to be:

i.$5.10
ii.$6.80?
Explain and show your workings

Reference no: EM133557800

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