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in this video what Id like to do is walk through an example of hedging with futures contracts and be a relatively specific example so what were going to look at here is assume youre a delivery company whose expenses are tied to fuel prices youre making deliveries those fuel prices go up your expenses are going to rise you anticipate that you use 90,000 gallons of gasoline per month its currently July 1st and you want to hedge your next three months of fuel costs and youre going to use the are Bob gasoline futures contract in order to do that so lets get a little bit of information on the are Bob gasoline futures contract first of all each contract is for 42,000 gallons so one contract 42,000 gallons two contracts 84,000 gallons and so on contracts expire at the end of the prior month so for example if we were to buy an August contract that would expire at the end of July so if we bought an August contract were taking delivery at the end of July if we sell an August contract we
