Mikes company must pay for 21000 gallons of heating oil


Mike's company must pay for 21,000 gallons of heating oil next week. He's decided to use the futures market to hedge price risk. The futures price for heating oil was $2.05 per gallon the day he entered into the contract. The contract size is 21,000 gallons. The initial margin is $6,075 and maintenance margin is $4,500. If the price of heating oil is $2.15 the day after Mike opened his position, what would be his ending margin balance for that day? Assume any deficits are eliminated to keep the position open.

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Financial Management: Mikes company must pay for 21000 gallons of heating oil
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