Asked by Jackson Brown on Jul 27, 2024
Verified
On April 1, you sold one S&P 500 Index futures contract at a futures price of 1,550. If, on June 15, the futures price was 1,612, what would be your profit (loss) if you closed your position (without considering transactions costs) ?
A) $1,550 loss
B) $15,550 loss
C) $15,550 profit
D) $1,550 profit
S&P 500 Index
A market-capitalization-weighted index of 500 of the largest publicly traded companies in the U.S., used as a benchmark for the overall stock market performance.
Futures Price
The predetermined price agreed upon in a futures contract for the delivery of an asset at a future date.
Loss
A reduction in money or asset value, often the difference between purchase price and selling price if the latter is lower.
- Master the concept of profit and loss mechanisms in futures trading.
Verified Answer
DO
doris okoawohJul 28, 2024
Final Answer :
B
Explanation :
The profit or loss from a futures contract is calculated by taking the difference between the selling price and the buying price, then multiplying by the contract multiplier (which is typically $250 for S&P 500 Index futures). In this case, the selling price was 1,550 and the buying (closing) price was 1,612, resulting in a loss of 62 points. Multiplying 62 by $250 gives a loss of $15,550.
Learning Objectives
- Master the concept of profit and loss mechanisms in futures trading.