Question

Use the following corn futures quotes: Contract Month Mar Corn 5,000 bushels Open High Low Settle 455.125 457.000 451.750 452.000 467.000 468.000 463.000 463.250 477.000 477.500 472.500 473.000 475.000 475.500 471.750 472.250 May Chg Open Int -2.750 597,913 -2.750 137,547 -2.000 153, 164 -2.000 29,258 July Sep a. How many of the September contracts are currently open? Contracts b. How many of these contracts should you sell if you wish to deliver 75,000 bushels of corn in September? Contracts c. If you actually make delivery, how much will you receive? Assume you locked in the settle price. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Price

Answer 1

a) In the context of derivatives like Corn Futures, the no. of Contracts currently open (outstanding) are given by the Open Interest figure (last column in this case)

Hence, the total no of September contracts which are open is 29258 each on the buy side as well as the sell side

b) As One contract is for 5000 bushels, the total no. of contracts to sell(deliver) 75000 bushels in September is

= 75000/5000 = 15 contracts

c) As the settle price of 472.25 cents is locked in for 15 contracts, the actual amount received will be

= $4.7225 per bushel *5000 bushels/ contract * 15 contracts = $354,187.50