An oil refining company enters into 1,000 long one- month crude oil futures contracts on NYMEX at a futures price of $43 per barrel. At maturity of the contract, the company rolls half its position forward into new one-month futures and closes the remaining half. At this point, the spot price of oil is $44 per barrel, and the new one-month futures price is $43.50 per barrel. At maturity of this second contract, the company closes out its remaining position. Assume the spot price is $46 per barrel. Ignoring interest, what are the company'’s gains or losses from its futures positions?
An oil refining company enters into 1,000 long one- month crude oil futures contracts on NYMEX at a futures price of $43 per barrel. At maturity of the contract, the company rolls half its position forward into new one-month futures and closes the remaining half. At this point, the spot price of oil is $44 per barrel, and the new one-month futures price is $43.50 per barrel. At maturity of this second contract, the company closes out its remaining position. Assume the spot price is $46 per barrel. Ignoring interest, what are the company'’s gains or losses from its futures positions?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An oil refining company enters into 1,000 long one- month crude oil futures contracts on NYMEX at a futures price of $43 per barrel. At maturity of the contract, the company rolls half its position forward into new one-month futures and closes the remaining half. At this point, the spot price of oil is $44 per barrel, and the new one-month futures price is $43.50 per barrel. At maturity of this second contract, the company closes out its remaining position. Assume the spot price is $46 per barrel. Ignoring interest, what are the company'’s gains or losses from its futures positions?
![An oil refining company enters into 1,000 long one-
month crude oil futures contracts on NYMEX at a
futures price of $43 per barrel. At maturity of the
contract, the company rolls half its position forward
into new one-month futures and closes the
remaining half. At this point, the spot price of oil is
$44 per barrel, and the new one-month futures price
is $43.50 per barrel. At maturity of this second
contract, the company closes out its remaining
position. Assume the spot price is $46 per barrel.
Ignoring interest, what are the company's gains or
losses from its futures positions?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdc4f0294-9dd6-4de2-bbda-3e977011c9a8%2F8c77483c-b406-43d5-8196-46a160c4cd2b%2F1p174xf_processed.jpeg&w=3840&q=75)
Transcribed Image Text:An oil refining company enters into 1,000 long one-
month crude oil futures contracts on NYMEX at a
futures price of $43 per barrel. At maturity of the
contract, the company rolls half its position forward
into new one-month futures and closes the
remaining half. At this point, the spot price of oil is
$44 per barrel, and the new one-month futures price
is $43.50 per barrel. At maturity of this second
contract, the company closes out its remaining
position. Assume the spot price is $46 per barrel.
Ignoring interest, what are the company's gains or
losses from its futures positions?
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