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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Future Contract Asset (Fair Value Hedge)
Referring to BPP SBR Study Text Chapter 8 Illustration 11, on the topic of fair value hedging
1 July 20X6
Joules sold 10,000 ounces in the futures market for $215 per ounce for delivery on 30 June 20X7.
31 December 20X6
The futures price for 30 June 20X7 delivery was $198 per ounce.
30 June 20X7
The trader sold the inventories and closed out the futures position at the then spot price of $190 per ounce.
May I know that why it is increase in future contract asset (a gain) although the price of future keeps dropping?
You have agreed to sell for 215.
The selling price (for everyone else drops to 190).
So you are happy – it’s a gain.