You took a long position on the Micro WTI Crude Oil futures (MCL) when value ofthe futures was 71 and close it out four days later at a futures price of 89. Ignoringinterest, what are your losses or gains in dollar? Remember that the Micro WTICrude Oil futures are quoted in 10-cent increments, and a one-tick move in theMicro WTI Crude Oil futures equal to $1 or a one point move in the Micro WTICrude Oil futures equal to $10.$135.O $162.$234.$180.O $216.

Futures contract is a legal agreement to buy or sell a specified asset at a predetermined price at…

Answered: You took a long position on the Micro…

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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A non-dividend paying asset is current priced at $25 and the risk-free interest rate is 8% per annum. Today, you enter into a six-month futures contract to buy a unit of this asset. Three months from now the underlying price has fallen to $18 (but note that the interest rate has not moved). Which of the answers below is closest to the fall in the futures price? Use discrete discounting. Question 7Answer a. $6.50 b. $5.50 c. $7.50 d. $4.50
A trader takes a view that March KLSE CI futures which are currently trading at 1188.60 are about to enter a downtrend. Should the trader go long or short futures. Assuming the trader maintains their original position until expiry and the cash settlement price is 1185.40, what will be the profit or loss? The contract size is RM50 per contract.
You find the following information in December 2019. Assume the T-bill maturity and futures delivery are on the same day. Ignore transactions costs. Treasury Bill Maturity DTM Bid Asked Mar 20 90 1.19 1.18 Index Futures S&P 500 Index (CME) – 250 x index, cents per unit Open High Low Settle Mar 20 3324 3326 3320 3322 S&P 500 closed at $3329 on the same day. Suppose that if you buy one unit of S&P 500 index today, you will be entitled to a 2% dividend yield in March. Design a zero net investment arbitrage strategy involving: (1) buying the index for $3329, (2) shorting the futures for no cash now, (3) and borrowing $3329 at the spot rate. Show your profit per one futures contract (250 units of the index). a. $12,395 b. $10,114 c. $18,948 d. $11,639
The one-year futures price on a particular stock-index portfolio is 2,620, the stock index currently is 2,600, the one-year risk-free interest rate is 2.0%, and the year-end dividend that will be paid on a $2,600 investment in the index portfolio is $25. Required: By how much is the contract mispriced? (Input the amount as positive value.) The futures price is its "proper" or parity value.
Assume that you entered into a futures contract to buy C82,500 at $1.20 per C. Suppose the futures price closes today at $1.25. How much have you made/lost? tof Select one: O a You have made $2.500.00. O b. You have made $4125.00. O G. You have lost $2,500.00. Od You have lost $4,125.00.
You enter into a 1-year futures contract on a non-dividend paying stock when the stock price is $100 and the risk-free interest rate is 5% per annum. Six months later the stock price has fallen to $90, and the interest rate is 4% per annum. Which of the answers below is closest to the change in the futures price? Assume discrete compounding and discounting. Question 6Answer a. -12.34 b. -11.40 c. -10.00 d. -13.20
Assume a trader who has no existing CPO positions is bullish on CPO spot and futures pricing over the next three months. He feels CPO prices will rise, and he wants to benefit from his prediction. He points out that the 3-month CPO futures with a 90-day maturity are now trading at $980/ton. 1. Calculate the profit/loss if the CPO price is $1,176.00 in 90 days (at futures maturity). 2. Calculate the profit/loss if the CPO price drops 20% to $784 in 90 days.
Consider these futures market data for the June delivery S&P 500 contract, exactly one year from today. The S&P 500 index is at 1,950, and the June maturity contract is at F0 = 1,951.a. If the current interest rate is 2.5%, and the average dividend rate of the stocks in the index is 1.9%, what fraction of the proceeds of stock short sales would need to be available to you to earn arbitrage profits?b. Suppose now that you in fact have access to 90% of the proceeds from a short sale. What is the lower bound on the futures price that rules out arbitrage opportunities?c. By how much does the actual futures price fall below the no-arbitrage bound?d. Formulate the appropriate arbitrage strategy, and calculate the profits to that strategy.
Suppose that, on 5 November 2020, you opened a short position in a two-year futures contract on the Tesla stock. The share price at the beginning of the contract was $146, and the initial futures price was equal to a theoretical two-year forward price. Assume the following: initial margin of 40% of the futures value, maintenance margin of 32% of the futures value, 3% flat interest rate, continuous compounding, no withdrawals of the excess margin. Next, suppose that, on 1 November 2022, the Tesla stock is priced at $228 per share, and it goes down by 1% daily over 2nd, 3rd and 4th November. Suppose further that, on 1 November 2022, you have received a margin call from your broker (this was your first margin call during this contract) and had to make an instant adjustment to your margin account. Your position in this contract is closed on 4 November 2022. How can you assess your overall profit or loss? Would your overall profit/loss from 1) change if, on 5 November 2020, you had…
Suppose that, on 5 November 2020, you opened a short position in a two-year futures contract on the Tesla stock. The share price at the beginning of the contract was $146, and the initial futures price was equal to a theoretical two-year forward price. Assume the following: initial margin of 40% of the futures value, maintenance margin of 32% of the futures value, 3% flat interest rate, continuous compounding, no withdrawals of the excess margin. Next, suppose that, on 1 November 2022, the Tesla stock is priced at $228 per share, and it goes down by 1% daily over 2nd, 3rd and 4th November. Suppose further that, on 1 November 2022, you have received a margin call from your broker (this was your first margin call during this contract) and had to make an instant adjustment to your margin account. Show how the balance on your margin account was changing over this period (i.e., 1-4 November 2022).
Suppose that, on 5 November 2020, you opened a short position in a two-year futures contract on the Tesla stock. The share price at the beginning of the contract was $146, and the initial futures price was equal to a theoretical two-year forward price. Assume the following: initial margin of 40% of the futures value, maintenance margin of 32% of the futures value, 3% flat interest rate, continuous compounding, no withdrawals of the excess margin. Next, suppose that, on 1 November 2022, the Tesla stock is priced at $228 per share, and it goes down by 1% daily over 2nd, 3rd and 4th November. Suppose further that, on 1 November 2022, you have received a margin call from your broker (this was your first margin call during this contract) and had to make an instant adjustment to your margin account. Calculate the value of your position in this contract at a close of each day between 1-4 November 2022. Show and explain each step of your derivations.
Consider the following prices, volume and open interest for gold futures contracts. Contract size: 100 oz Price units: $/oz (a) What was the value of the contract that expires in February 2022 when the market closed? (b) Which futures contracts had a higher settle price on the previous trading day? (c) Would a speculator prefer to go short at the daily high price or the daily low price?

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