Question

The contract size for platinum futures is 50 troy ounces. Suppose you need 400 troy ounces of platinum and the current futures price is $1,335 per ounce. How many contracts do you need to purchase? How much will you pay for your platinum? What is your dollar profit if platinum sells for $1,375 a troy ounce when the futures contract expires? What if the price is $1,280 at expiration?

Answer #1

**Given,**

**Contract size = 50 troy ounces**

**Required = 400 troy ounces**

**Current futures price = $1335 per ounce**

**Solution :-**

**No. of contracts = required/contract size**

**= 400/50 = 8 contracts**

**You need to purchase 8 contracts**

**Payment for platinum = Contract size x current futures
price**

**= 50 troy ounces x $1335 per ounce = $66750**

**Sale price = $1375**

**Gain per ounce = Sale price - current futures
price**

**= $1375 - $1335 = $40 per ounce**

**Dollar profit = Required x gain per ounce**

**= 400 ounces x $40 per ounce = $16000**

**Sale price = $1280**

**Loss per ounce = Current futures price - Sale
price**

**= $1335 - $1280 = $55 per ounce**

**Dollar loss = Required x loss per ounce**

**= 400 ounces x $55 per ounce = $22000**

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