Calculate the hedging gain-loss for all three prices, Finance Basics

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Calculate the hedging gain-loss for all three prices

Problem

Imagine UniAIR purchases a call option (the right to buy a given amount at a fixed price before a specified date) with the strike price (agreed price) of $100 per barrel for 1000 barrel and a premium of $1.64 per barrel (This means UniAIR needs to pay 1,640$ now). Assume that the price of crude oil is (1) $90; (2) $101.64; and (3) $120. Calculate the hedging gain/loss for all three prices and make a decision on the call option.

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Finance Basics: Calculate the hedging gain-loss for all three prices

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