Asked by Sally Suzie on Jul 23, 2024
Verified
You purchased one oil future contract at $70 per barrel. What would be your profit (loss) at maturity if the oil spot price at that time is $73.12 per barrel? Assume the contract size is 1,000 barrels and there are no transactions costs.
A) $3.12 profit
B) $31.20 profit
C) $3.12 loss
D) $31.20 loss
E) None of the options are correct.
Oil Future Contract
A legal agreement to buy or sell a specific amount of crude oil at a predetermined price at a specified time in the future.
Spot Price
The existing cost at which an asset is available for immediate purchase or sale.
Profit/Loss
The financial result of business operations or investment activities, calculated as the difference between revenues and the costs associated with generating those revenues.
- Understand the processes involved in generating profits and incurring losses in futures trading.
Verified Answer
MS
Maria SamaniegoJul 27, 2024
Final Answer :
E
Explanation :
The profit would be ($73.12 - $70) * 1,000 = $3,120, which is not an option listed.
Learning Objectives
- Understand the processes involved in generating profits and incurring losses in futures trading.