the question asks to determine cfs when we are short in a future. since we have agreed to sell at 92 them the cf should be 92000. whyvthebanswer says we will sell at 103000? where does this come from ? is it bc we are closing our position? thanks
Hi dimitris13 This is just because we are told in the question (just before part (iv) that the spot price in two months' time turns out to be 103 per tonne. We would expect the price of a future for immediate delivery to be close to the spot price. So the producer will sell the coffee for 103,000 and make a loss of 11,000 (103,000-92,000) on the future, so overall receiving a net payment of 92,000.
The futures position was taken to hedge a risk and the risk disappears once the coffee is sold, so at that point the position can be closed out
