Strategy: _Nov soybeans at $9.16/bu and simultaneously Jan soybeans at $9.30/bu. (insert “buy" or “sell") This is called a ("bull spread" or “bear spread")

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter9: Decision Making Under Uncertainty
Section: Chapter Questions
Problem 46P
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A4
October 7: November soybeans at $9.16/bu, Jan soybeans at $9.30/bu
You expect the spread to widen or narrow relative to January. (Circle narrow or widen
and complete the rest of this problem according the choice you selected.)
Strategy:
_Nov soybeans at $9.16/bu and simultaneously
Jan soybeans at $9.30/bu. (insert “buy" or “sell")
This is called a
("bull spread" or “bear spread")
October 17: Nov @ $9.08/bu., Jan @ $9.25/bu. Calculate profit or loss per bushel on
the spread. (Report the spread relative to January)
Method 1: (using the individual legs)
Nov:
Jan:
Combination:
Method 2: (using the change in the spread).
October 7: Bought or Sold the spread at
October 17: Bought or Sold the spread at
Result:
Transcribed Image Text:October 7: November soybeans at $9.16/bu, Jan soybeans at $9.30/bu You expect the spread to widen or narrow relative to January. (Circle narrow or widen and complete the rest of this problem according the choice you selected.) Strategy: _Nov soybeans at $9.16/bu and simultaneously Jan soybeans at $9.30/bu. (insert “buy" or “sell") This is called a ("bull spread" or “bear spread") October 17: Nov @ $9.08/bu., Jan @ $9.25/bu. Calculate profit or loss per bushel on the spread. (Report the spread relative to January) Method 1: (using the individual legs) Nov: Jan: Combination: Method 2: (using the change in the spread). October 7: Bought or Sold the spread at October 17: Bought or Sold the spread at Result:
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