You went short on a gold futures contract two weeks ago at $300/oz. The price is...
You went short on a gold futures contract two weeks ago at $300/oz. The price is now $280/oz. You want to gain on any additional down movements but still try to protect at least a $10/oz profit. What order could you place with your broker now?
a. Buy limit 270
b. Buy stop 270
c. Short limit 290
d. Buy stop 290
e. Short limit 270
Homework Answers
Answer: Option d is correct.
The gold futures contract are shorted at $300, so when the price moves down to $280 there is $300-$280=$20 gain per contract
To protect at least $10 profit means that the contracts should be purchased at $290
The order that will get executed when the price moves up from $280 to $290 is buy stop order. A buy stop order is used to limit the loss.
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