Question

A trader buys two September futures contracts on orange juice when the futures price is 160 cents per pound. Each contract is for the delivery of 15,000 lbs of orange juice. How much does the trader lose or gain if the orange juice price at the end of the contract is 145 cents per pound?

a) $3000 profit b) $4500 loss c) $1500 profit d) $1500 loss e) $4500 profit

Answer 1

Total amount of loss was made on his position because he was taking a long position and he was bullish, but the orange juice futures on maturity has gone down and he will have to bear the loss in the future market.

Total amount of loss on one contract

= (Orange price at the end of the contract period-buying price)*number of units

= ( 145-160)*15000/100

= ($2250)

Total loss= [number of contracts ×loss on each contract]

=[ 2*2250]=$ 4500

Correct answer is option ( B)$ 4500 Loss.