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Question
Corn call options with a $1.70 strike price are trading for a $0.15 premium. Farmer Jayne decides to hedge her 20,000 bushels of corn by selling short call options. Six-month interest rates are 4.0% and she plans to close her position and sell her corn in 6 months. What is her profit or loss if spot prices are $1.60 per bushel when she closes her position?A) $1,000 loss
B) $2,000 gain
C) $2,120 loss
D) $2,120 gain
Answer
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