Question

You are short 25 gasoline futures contracts, established at an initial settle price of $1.36 per...

You are short 25 gasoline futures contracts, established at an initial settle price of $1.36 per gallon, where each contract represents 42,000 gallons. Over the subsequent four trading days, gasoline settles at $1.33, $1.37, $1.39, and $1.44, respectively. Compute the cash flows at the end of each trading day, and compute your total profit or loss at the end of the trading period.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Future contract are settled in net cash basis.

Cash flow are each trading day are as follow

Day 1

=25*4200*(1.36-1.33)

=25*42000*.03

=31500 cash inflow

Day 2

= 25*42000*(1.33-1.37)

=25*42000*-.04

=(42000) cash outflow

Day 3

=25*42000*(1.37-1.39)

=25*42000*(-.02)

=(21000) cash outflow

Day 4

= 25*42000*(1.39-1.44)

=(52500) cash outflow

Net profit/(net loss) is equal to net cash flow

= 31500-42000-21000-52500

= 84000

Alternative method

25*42000*(1.36- 1.44)

= 25*42000*(-.08)

= (84000)

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You are long 10 gold futures contracts, established at an initial settle price of $1,600 per...
You are long 10 gold futures contracts, established at an initial settle price of $1,600 per ounce, where each contract represents 100 ounces. Over the subsequent four trading days, gold settles at $1,603, $1,598, $1,601, and $1,602, respectively.    Calculate the profit or loss for each trading day. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)     Profit/Loss   Day 1 $      Day 2 $      Day 3 $      Day 4 $       Compute your...
You short 25 oil futures contracts at a price of $1.52 per gallon, where each contract...
You short 25 oil futures contracts at a price of $1.52 per gallon, where each contract represents 42,000 gallons. You initial margin is $6,075 per contract, and the maintenance margin is 4,500 per contract. If the settlement price today is $1.59, what is your gain or loss? Will you receive a margin call? If so, how much do you need to deposit into the account?
can you make the answer short and explain it few words, please You are long 10...
can you make the answer short and explain it few words, please You are long 10 gold futures contracts, established at an initial settle price of $1,500 per ounce, where each contract represents 100 troy ounces. Your initial margin to establish the position is $12,000 per contract and the maintenance margin is $11,200 per contract. Over the subsequent four trading days, gold settles at $1,495, $1,490, $1,505, and $1,515, respectively. Compute the balance in your margin account at the end...
4. Your broker requires an initial margin of $4,500 per futures contract on soybeans and a...
4. Your broker requires an initial margin of $4,500 per futures contract on soybeans and a maintenance margin of $3,000 per contract. Soybean futures contracts are based on 5,000 bushels and quoted in cents per bushel. You LONG 8 wheat futures contracts at the closing settlement price quote of 1372 four days ago. Over the subsequent four trading days, soybean settles at 1361, 1337, 1365, and 1379, respectively. Compute and show the equity balance in your margin account at the...
A company wishes to hedge its exposure to a new fuel whose price changes have a...
A company wishes to hedge its exposure to a new fuel whose price changes have a 0.7 correlation with gasoline futures price changes. The company will lose $500,000 for each 1 percent increase in the price per gallon of the new fuel over the next three months. The new fuel's price change has a standard deviation that is 100% greater than price changes in gasoline futures prices. How many gasoline futures contracts should be traded (one gasoline futures contract represents...
At the end of day 0, you go short in 10 futures contracts; each contract is...
At the end of day 0, you go short in 10 futures contracts; each contract is for a single unit of an underlying commodity with a futures settlement price at the end of day 0 of $96. This is the futures price for you at the end of day 0, therefore there is no marking to the market for you on that day. The initial margin is $8 per contract and the maintenance margin is $6 per contract. Over the...
You buy 4 December gold futures contracts when the futures price is $1,801.45 per ounce. Each...
You buy 4 December gold futures contracts when the futures price is $1,801.45 per ounce. Each contract is on 100 ounces of gold and the initial margin per contract is $4,000. The maintenance margin per contract is $1,250. During the next 6 days the futures price falls slowly to $1,798.65 per ounce. What is the balance of your margin account at the end of the 6 days?
Suppose that you enter into a short futures contract to sell July silver for $29.80 per...
Suppose that you enter into a short futures contract to sell July silver for $29.80 per ounce. The size of the contract is 5000 ounces. The initial margin is $ 3500, and the maintenance margin is $2500. What change in the futures price will lead to a margin call? A trader buys two July futures contracts on orange juice. Each contract is for the delivery of 15,000 pounds. The current futures price is 170 cents per pound, the initial margin...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT