Part 1
Select the correct statement of the futures contract
based on the Bloomberg screen below:
The contract size is 50,000 pounds and the minimum price
fluctuation per contract is $500.
The buyer needs to pay $62,475 in May 2019 when they buy this
contract.
The price of this commodity is $12.5 per pound.
This futures contract will be delivered in May 2020.
Part 2
A power producing company wants to purchase a natural
gas futures contract. It will use the natural gas to generate
electricity. The company’s underlying position in natural gas is
short, so its futures position should be short.
Part 3
What’s the expected futures price for gold based on the
information below?
Spot price: $1,500 per troy ounce
Secured storage cost: $250 per troy ounce
Insurance cost: $300 per troy ounce
Convenience benefit: $400 per troy ounce
$1,850 per troy ounce
Part 4
Which of the following is NOT an option for the
commodity buyer near the end of a futures contract?
Rolling over the contract to another future-dated futures
contract
Preparing to accept physical delivery
Choosing not to exercise the contract
Preparing to exchange gains or losses in case