A farmer agreed to sell corn in 6 months from now, at the spit price (S2) of that day. To reduce his price risk, he took a short position in the futures market for F1 = £10. What is the effective price he received if 6 months from now, F2 = £8 and S2 = £7
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- as a soybean buyer, you are concerned about soy prices. Currently, they are at $60 per bushel .Therefore, you enter into the appropriate futures contract at the current spot price. What is your profit or loss, if six months later, soybean is selling at the spot market for 51 bushell? why?Suppose you purchase the July 2020 call option on corn futures with a strike price of $3.35. Assume you purchased the option at the last price of the day. Use Table 23.2. a. How much does your option cost per bushel of corn? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) b. What is the total cost of your position? Assume each contract is for 5,000 bushels. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. Suppose the price of corn is $3.31 per bushel at expiration of the option contract. What is your net profit or loss from this position? (Do not round intermediate calculations and enter your answer as a positive value rounded to 2 decimal places, e.g., 32.16.) d. What is your net profit or loss if corn futures prices are $3.53 per bushel at expiration? (Do not round intermediate calculations and enter your answer as a positive value rounded to 2 decimal places, e.g., 32.16.) a.…A farm that produces corn is looking to hedge their exposure to price fluctuations in the future. It is now May 15th and they expect their crop to be ready for harvest September 30th. You have gathered the following information: Bushels of corn they expect to produce 44,000 May 15th price per bushel $3.08 Sept 30 futures contract per bushel $3.22 Actual market price Sept 30 $3.37 Required (round to the nearest dollar): Calculate the gain or loss on the futures contract and net proceeds on the sale of the corn. Net gain or loss on future $Answer Sell the corn $Answer Net $Answer
- Suppose you sell six September 2020 palladium futures contracts this day at the last price of the day. Use Table 23.1. a. What will your profit or loss be if palladium prices turn out to be $2,034.50 per ounce at expiration? (Do not round intermediate calculations and enter your answer as a positive value rounded to 2 decimal places, e.g., 32.16.) b. What will your profit or loss be if palladium prices are $1,977.50 per ounce at expiration? (Do not round intermediate calculations and enter your answer as a positive value rounded to the nearest whole number, e.g., 32.) a. Loss b. Profit Answer is not complete. 6,200You have taken a short position in a futures contract on corn at $2.60 per bushel. Over the next 5 days the contract settled at 2.52, 2.57, 2.62, 2.68, and 2.70. You then decide to reverse your position in the futures market on the fifth day at close. What is the net amount you receive at the end of 5 days? A. $0.00 B. $2.60 C. $2.70 D. $2.80 E. Must know the number of contracts3,On September 26, the spot price of wheat was $3.5225 per bushel and the price of a December wheat futures was $3.64 per bushel. The interest forgone on money tied up in a bushel until expiration is 0.03, and the cost of storing the wheat is 0.0875 per bushel. The risk premium is 0.035 per bushel. a. What is the expected price of wheat on the spot market in December? b. Show how the futures price is related to the spot price. c. Show how the expected spot price at expiration, your answer in part a, is related to the futures price today. d. Show how the expected futures price at expiration is related to the futures price today. e. Explain who earns the risk premium and why.
- The futures price of a commodity such as wheat is $2.50 a bushel. Futures contracts are for 10,000 bushels, and the margin requirement is $2,500 a contract. The maintenance market requirement is $1,000. A speculator expects the price of the commodity to rise and enters into a contract to buy wheat. d. If the futures price rises to $2.70, what must the speculator do? e. If the futures price continues to decline to $2.32, how much does the speculatorhave in the account?VijayIn January s of 2018, you took a short position on 100 Feeder Cattle futures contracts that matures in September 2018. The maintenance margin is 60% of the contract size (- 148.05 * 100* 60%) and if your margin goes below the maintenance margin you will get a margin call. Determine the following: 1) Based on futures prices in January 5. what is the market's expectation on future price movements of cattle spots? 2) Based on your position, are you a hodger or a speculator? 3) As of at the end of Apr 2018, is this position profitable? 4) Did you have any margin calls before the end of April? Futures Jaruary 5, 2018) in uS. Fed Cattle February 2018 April 2018 June 2018 August 2018 October 208 December 2018 Close 122.25 Change 0.00 108 Close 149.03 145.55 145.83 Change 343 333 315 Feeder Cattle January 2018 March 2018 April 2018 May 2018 August 2018 September 2018 12383 114.85 102 1173 130 145.48 3.30 112.95 115.08 173 145 148.48 148.05 2.40 2.18 Feeder Cattle Sot Price FER CA 120 an 27 A…
- Table 2.7 Corn futures prices on the Chicago Mercantile Exchange, January 3, 2019 Maturity Last Mar-19 May-19 Jul-19 Sep-19 Dec-19 Mar-20 Change High 3.8025 0.7500 3.8075 3.7975 3.8800 0.5000 3.8800 3.8750 3.9500 0.2500 3.9525 3.9450 3.9700 0.0000 3.9700 3.9650 4.0075 -0.5000 4.0100 4.0025 4.0975 0.0000 4.1000 4.0950 Low Source: www.cmegroup.com.Your company needs £500,000 per month. You choose to hedge half of the required amount by entering into a futures contract at $1.148/E. How much did you save by hedging if the spot price today is $1.195/£?In January 5th of 2018, you took a short position on 100 Feeder Cattle futures contracts that matures in September 2018. The maintenance margin is 60% of the contract size (= 148.05 * 100 * 60%) and if your margin goes below the maintenance margin you will get a margin call. Determine the following: 1) Based on futures prices in January 5th, what is the market’s expectation on future price movements of cattle spots? 2) Based on your position, are you a hedger or a speculator? 3) As of at the end of Apr 2018, is this position profitable? 4) Did you have any margin calls before the end of April?