Question

a. Today, you are looking at a Euro Futures contract:

Maturity: ​​​ Due on the 3rd Wednesday of September 2020

Size:​​​ €125,000​

Price of the futures today​ $1.12/€

If you believe the spot rate would be $1.15 in September 2020, then you should ____ (Buy or Sell) the futures.

True or False _________: if you buy the futures today and do nothing until the maturity day, then you will need to buy €125,000 at $1.12/€ in September 2020.

True or False _________: if you buy the futures today and do nothing until the maturity day, then you will need to sell €125,000 in the spot market at whatever the prevailing rate is, to clear your speculative position.

b. Separate from (a), if tomorrow you change to believe the spot rate would be $1.09 in September 2020 and the futures price is still $1.12/€, then you should ____ (Buy or Sell) the futures.

True or False _________: if you sell the futures tomorrow and do nothing until the maturity day, then you will need to sell €125,000 at $1.09/€ in September 2020.

c. If you buy one futures in (a) and sell two futures in (b) according to your beliefs at the time of trading, what would be your overall profit (or loss)?

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE