Common use of Fact Pattern Clause in Contracts

Fact Pattern. Copper Wire Fabricator A is concerned about possible reductions in the price of copper. Currently it is November and it owns inventory of 100,000 pounds of copper and 50,000 pounds of finished copper wire. Currently, deferred futures prices are lower than the nearby futures price. Copper Wire Fabricator A expects to sell 150,000 pounds of finished copper wire in February. To reduce its price risk, Copper Wire Fabricator A sells 150,000 pounds of February COMEX Copper Referenced Contracts. hedging transaction meets the general re- quirements for bona fide hedging trans- actions (§§ 151.5(a)(1)(i)–(iii)) and the provi- sions for owning a commodity (§ 151.5(a)(2)(i)(A)). The sale of Referenced Contracts represents a substitute for trans- actions to be taken at a later time. The transactions are economically appropriate to the reduction of risk in the conduct and management of the commercial enterprise because the price of copper could drop fur- ther. The transactions in Referenced Con- tracts arise from a possible reduction in the value of the inventory that it owns.