Using the opening and closing basis approach to finish the following blanks.DateCashFutures1-OctCash Price $6.30May Futures$6.75Cost of holding from Oct 1 to May 1 = $0.21Expected Closing Basis = -$0.15What is the expected profit margin? =1-Oct1-MaySell Cash @ $6.40Sell May Futures @Buy May Futures @ $6.45.$6.75What is the opening basis?What is the actual closing basis?What is the gain or loss on futures market result? =What is the gain or loss on cash market result? =What is the realized price (or net selling price)? =What is the overall profit? =What is the realized price?

What is the opening basis?The cost of holding shorts ($90.73) less the anticipated closing basis…

Answered: Using the opening and closing basis…

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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7
Given the following information for December 24 corn futures, identify the "In the Money", "At The Money", and "Out of the Money" 22 puts and Calls. The December 24 futures price is $4.71. Also, calculate the intrinsic and extrinsic values of the premiums. 24 25 26 27 28 29 30 31 32 33 34 35 36 37 \table[[Strike,Premium],[Prices,Puts,Monies],[5.2,0.655,Out],[5.1,0.583,In],[5,0.513,At],[4.9,0.447,Out],[4.8,0.386,],[4.7,0.33,],[4.6,0.276,],[4.5,0.227,],[4.4,0.185,],[4.3,0.147,]] \table[[Puts,,],[Intrinsic,Extrinsic,Calls],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,]]
Calculate Duolingo’s underpricing if the offer price equals $102 and the closing price on the first trading day equals $134.26.
Q.Suppose you buy a stock at 62$ and sell futures contract at 59$. What is your profit at expiration if the asset price goes to 67$ (Ignore carrying cost) a)+3 $ b) -5 $ c) $-1 d) +1 $ e) None of the above
1. Complete the following tables (the example from the course): We start with the assumption that the futures price is 100$ when the transaction opens, the initial margin requirement is 5$, and the maintenance margin requirement is 3$. Table 1. Holder of long position of 10 contracts Day Beginning Funds Settlement Futures price change (5) Gain/Loss (6) Ending balance (7) (1) balance (2) deposited (3) price (4) 0 100.00 99.20 96.00 101.00 103.50 103.00 6 104.00 Table 2. Holder of short position of 10 contracts Day Funds Settlement Beginning balance (2) Futures price change (5) Gain/Loss (6) Ending balance (7) (1) deposited (3) price (4) 0 100.00 1 99.20 2 96.00 3 101.00 4 103.50 5 103.00 6 104.00 2. Suppose that an European call option on 1000 shares has the strike price 22 $/share and the premium 0.8 $/share. a) What will be the buyer's payoff if the spot price at maturity is 23.1 $/share? Draw the diagram. b) What will be the seller's (writer) payoff if the spot price at maturity is…
Prices of a futures contract for 5 consecutive trading-days are provided in the table below. The initial margin requirement is set at $6.00 per contract and the maintenance margin is $3.60 per contract. Futures Price Day 0 $120 1 $118 2 $117 3 $119 4 $123 $125 5 On day 0, a trader enters into a short position for 15 contracts. The ending balance for the margin account on day 5 is closest to: O a. $15. O b. $210. O C. None of the above. O d. $60.
A trader has decided to roll a short hedge forward until December to hedge a long position in corn inventory. The schedule below shows the dates on which trades are made and the prices. a. Determine the effective price at which the corn was sold on December 10. e b. Explain whether the trader would have made more (or less) profit if it had not hedged its inventory position. Price $5.73e Date Action February 64 Sell March Futures Buy March Futurese Sell May Futuresa Buy May Futures Sell July Futures< Buy July Futures Sell September Futures Buy September Futurese Sell December Futures $6.20 $5.90 $5.10e $5.30e $5.70 $6.20 $6.90e March 154 March 15e May 16 May 16 July 22e July 22e September 17e September 17 $6.95 $6.50 $6.45e December 12e Buy December Futures Sell Cash Inventory December 12e
Assume a futures price of Php5000 at the start of the transaction, with Php250 initial margin requirement and a Ph150 maintenance margin requirement. The trader takes in a short position of 10 contracts. Marking-to-market process occurs over the period of seven trading days. A. Complete the table above for the holder of the long position. B. When could there be a margin call? C. How much are the total gains or losses by the end of day 7?
An investor owns Citibank stock at $75. They want to sell some 3-month out- of-the-money call options against their position. STRIKES 72.50 75 77.50 CALL PRICE 5.60 4.12 2.84 Create a table showing the profit and loss for underlying trading at 70, 72.5, 75, 77.5, 80 and 82.5 for all the positions and the option strategy. Draw an expiry pay-off diagram, using the prices in the table.
We define basis as futures price minus cash price. In general, what is the expected sign of the basis one month prior to expiry for oil sold on the spot market at the futures contract’s delivery location? (i) positive (ii) negative (iii) zero
Basic Option Strategies Profit Computation Assume the below prices for calls and puts: Call Put Strike Jul Aug Oct Jul Aug Oct 165 2.7 5.25 8.1 2.4 4.75 6.75 170 0.8 3.25 6 5.75 7.5 1. Buy one August 170 call contract. Hold it until expiration. lIdentify the breakeven stock price at expiration. What is the profit/loss if ST=190? What is the maximum profit? 2. Buy one October 165 put contract. Hold it until the options expire. Identify the breakeven stock price at expiration. What is the Maximum possible loss from the transaction? What is the profit/loss if ST=185
1. If you had bought the January put with exercise price $105, will you exercise your put? 2. What is the profit (loss) on your position?

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