Final answer:
The maximum value for Y, for the trader to break even when hedging natural gas trading at Henry Hub, is $3.87, which is achieved by subtracting the profit per unit from the fixed amount X received from the futures swap.
Step-by-step explanation:
The question concerns a hedging strategy in the commodity market, specifically natural gas trading at Henry Hub. A trader buys natural gas at a fixed price (Y) and sells it for a price determined by L3D (Last 3 Days average) plus a markup of $0.03. To hedge, the trader enters into a futures swap selling at L3D and receiving a fixed amount X, which stands at $3.90 based on the given information. To determine the maximum value for Y to break even, we assess the transaction from the perspective that the future swap will neutralize the effect of L3D price fluctuations, leaving the trader with a profit of $0.03 per unit. Considering the trader receives X ($3.90) on the swap, breaks even on the purchase and sale of natural gas, the maximum value for Y should be equal to the fixed amount X ($3.90) minus the profit per unit ($0.03), resulting in $3.87.