You decided to speculate in the market and sold 8 platinum futures contracts when the futures price was $425 per troy ounce. The price on the contract maturity date was $400. The contract size is 50 troy ounces. What was your total profit or loss on the settlement day if you had to cover your position in the spot market? Show your answer to the nearest $. Do not use $ or , signs in your answer. Use a - sign if you lose money.
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2.11. Suppose that you enter into a short futures contract to sell July silver for $17.20 per ounce. The size of the contract is 5,000 ounces. The initial margin is $4,000, and the maintenance margin is $3,000. What change in the futures price will lead to a margin call? What happens if you do not meet the margin call?
Jennifer S.
Using market information as of the close of Tuesday, August 30 (see WSJ online), address the following questions regarding the Platinum futures contract, which is listed on the CME Group futures exchange. Assume the "Platinum, Engelhard industrial bullion" price is a reasonable proxy for the spot (cash) price. Assume that the maturity date of this futures is the 3rd last business day of the maturity month. Of the various Libor maturities reported (e.g., 1, 3, 6, or 12 months), use the maturity most closely matching that of the futures maturity date--but when computing the financing cost, please be sure to use an actual day count and a 360-day year (i.e., use the "Actual/360" day count convention). Also, assume warehousing and delivery costs are negligible and ignore for now convenience yields and leasing opportunities. (A) Determine the theoretical futures price ($ per ounce) for the January 2023 Platinum futures contract. (Hint: the 3-month Libor rate is probably the closest in maturity.) (B) i) Compare the actual reported futures price to your answer in (A); and ii) If the actual and theoretical futures prices differ, explicitly detail the steps for conducting an arbitrage and compute the potential arbitrage profit (per ounce). (C) Discuss factors that could potentially explain how an "apparent" arbitrage opportunity may have arisen in part B.
Akash M.
This is a Finance question regarding Futures. Consider a 1-year futures contract on an investment asset that provides no income. It costs $2 per unit to store the asset, with the payment being made at the beginning of the year. Assume that the spot price is $400 per unit and the risk-free rate is 10% per annum for all maturities. b) If currently the bid and ask on this 1-year futures contract are $444.5 and $445 respectively, what will you do? Please be specific and describe what this would imply? c) If this asset provides a lump sum income distribution mid-year that you forgot to estimate in a above, would you still be confident about your suggestion in b? Please explain. Please show all work.
Supreeta N.
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