Suppose that there are no storage costs for crude oil and the interest rate for borrowing or lending is $5\%$ per annum. How could you make money on January 8, 2007 by trading June 2007 and December 2007 contracts on crude oil? Use Table 2.2. The June 2007 settlement price for oil is $$\$ 60.01$$ per barrel. The December 2007 settlement price for oil is $$\$ 62.94$$ per barrel. You could go long one June 2007 oil contract and short one December 2007 contract. In June 2007 you take delivery of the oil borrowing $$\$ 60.01$$ per barrel at $5 \%$ to meet cash outflows. The interest accumulated in six months is about $60.01 \times 0.05 \times 0.5$ or $$\$ 1.50$$. In December the oil is sold for $$\$ 62.94$$ and $60.01+1.50=$ $$\$ 61.51$$ per barrel has to be repaid on the loan. The strategy therefore leads to a profit of $62.94-61.51$ or $$\$ 1.43$$ per barrel. Note that this profit is independent of the actual price of oil in June 2007 or December 2007. It will be slightly affected by the daily settlement procedures.