Asked by Mckay Hilton on Jul 26, 2024
Verified
On January 1, you bought one April S&P 500 index futures contract at a futures price of 3,420. If, on February 1, the April futures price was 3,430, what would be your profit (loss) if you closed your position (without considering transactions costs) ?
A) $2,500 loss
B) $10 loss
C) $2,500 profit
D) $10 profit
April Futures Price
The April Futures Price refers to the agreed-upon price set in a futures contract for the delivery of a specific commodity, financial instrument, or currency in April.
S&P 500 Index
An index of the American stock market reflecting the value of 500 large-cap companies with shares available on either the NYSE or NASDAQ.
- Gain insight into the function of profit and loss in futures trading.
Verified Answer
ST
Steve TorresAug 02, 2024
Final Answer :
C
Explanation :
The profit from a futures contract is calculated by taking the difference between the selling price and the buying price, then multiplying by the contract multiplier. For S&P 500 index futures, the contract multiplier is typically $250. Since the futures price increased from 3,420 to 3,430, the profit is (3,430 - 3,420) * $250 = $2,500.
Learning Objectives
- Gain insight into the function of profit and loss in futures trading.