Question

In: Finance

an investor takes a long position in one futures contract on gold, when the futures price...

an investor takes a long position in one futures contract on gold, when the futures price is $1900. one contract us for 100 troy ounces of gold. the contract is closed out when the futures price is $1,960. which is true?

investor made a loss of $4000
investor made a gain if $6000
investor made a loss of $6000
investor made a gain of $4000

Solutions

Expert Solution

Futures are a financial contract. Transaction price of an asset is predetermined for a transaction on future date. Buyer of a future contract is obligated to purchase the asset on decided price on future date.

Here, Investor has taken long position, so purchase price of gold = $ 1900 per troy ounce

At the date of expiry, future price is at $ 1960 per troy ounce. So, investor can sell the gold on this price.

Hence, gain for investor = (Selling price – purchase price) * quantity of gold per contract

                                            = ($ 1960 - $ 1900) * 100

                                            = $ 60 * 100 = $ 6,000

Answer: investor made a gain of $ 6,000

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

An investor takes long position in five August Gold futures contract. Each contract size is 100...
An investor takes long position in five August Gold futures contract. Each contract size is 100 troy ounces. Futures price is $1356.20. Initial margin requirement is $3,500 per contract and the maintenance margin is $2,500 per contract. Find out at what price the margin call will take place? After the margin call, how much the investor will have to deposit in the margin account?
One day, investor A takes a long position in 10 contracts of a certain futures, and...
One day, investor A takes a long position in 10 contracts of a certain futures, and investor B takes a short position in 10 contracts of the same futures. If this is the only transaction for the futures on the day, the trading volume for the futures is 20. Group of answer choices True/ False
On date 0, an investor starts a short position in one futures contract on Bitcoin. One...
On date 0, an investor starts a short position in one futures contract on Bitcoin. One contract is for delivery of 5 Bitcoins. Following are the future prices on subsequent dates. What is the cumulative gain for the investor from date 0 through date 5? Assume that the risk-free rate is zero. Date Bitcoin futures price ($ per 1 Bitcoin) 0 11,410 1 11,784 2 12,005 3 11,568 4 11,235 5 10,912
You enter into a short position in one gold futures contract worth $500 per ounce. Contract...
You enter into a short position in one gold futures contract worth $500 per ounce. Contract size is 100 ounces. The initial margin is $2,500 per contract and the maintenance margin is $1,500 per contract. If the market closes at $497.50 per ounce at the end of the day, what is the balance on your margin account?
You enter into a short position in one gold futures contract worth $500 per ounce. Contract...
You enter into a short position in one gold futures contract worth $500 per ounce. Contract size is 100 ounces. The initial margin is $2,500 per contract and the maintenance margin is $1,500 per contract. 1. How much will the price of gold have to change for you to receive a margin call and will it need to increase or decrease? 2. What is your initial margin deposit? 3. . If the market closes at $497.50 per ounce at the...
Suppose that an investor enters a long position in futures on date 0. If the futures...
Suppose that an investor enters a long position in futures on date 0. If the futures price increases on date 1, the investor's margin account balance will increase. Group of answer choices True False
Katie has a long position in one December beans futures contract. The contract size is 5,000...
Katie has a long position in one December beans futures contract. The contract size is 5,000 bushels. Each contract requires an initial margin (IM) deposit of $200 and a maintenance margin (MM) of $120. Assume the initial contract price is $2/bushel. a. If the contract price increases by 2 cents on Day 1, calculate the gain or loss of Katie and the new balance (margin) at the close of Day 1. b. Does Katie need to take some action at...
On January 1, you enter a long gold futures contract at the settle price of 1250/oz....
On January 1, you enter a long gold futures contract at the settle price of 1250/oz. Each gold contract is for 100 ounces. The minimum margin requirement is $5500, and the maintenance margin requirement is $4500. Given the futures settle prices below, what amount of margin is in your account at the market close on January 4th. Assume you keep the contract active through the four days and do not take any excess margin out of the account. January 2:...
One day, a long position in a futures contract sees gain from a daily settlement. Then,...
One day, a long position in a futures contract sees gain from a daily settlement. Then, a short position in the same contract sees loss from the daily settlement. Group of answer choices True False
The one-year futures price of gold is $1,213 per oz. (i.e., the futures price on a...
The one-year futures price of gold is $1,213 per oz. (i.e., the futures price on a contract that expires in one year). The spot price is $1,152 per oz. and the continuous risk-free rate is 2.17% per annum. The storage costs for gold are $2 per oz. payable in arrears and we assume gold provides no income. What is the arbitrage profit per 100 oz. of gold? Ignore transactions costs.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT