Question

3. Assume the commodity whi contract. As sec contract) are 90, 9. You initiated a short futures position at a price of 100 before leaving for school. Now you must be at school to take this exam so you can not monitor the progress of your position. What order could you place with your broker just before taking this exam to unwind your position if prices moved 10 points in your favor? a. Buy limit 90 b. Buy stop 90 c. Buy stop 110 d. Buy limit 110 e. Short stop 90 10. You went short 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 would 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 11. You have no open silver futures position. The December Comex silver futures contract is now at $4.40/oz. You believe it will be in a downward trend if it hits $4.20/oz. What order would you place with your broker now? a. Buy stop $4.20. b. Short stop $4.30. c. Short limit $4.40. d. Short stop $4.20. e. Short limit $4.20. 12. A contract's volume on a given day was 500. If this contract trades in accordance with the concept of (pure) nommal backwardation, then what positions would definitely not occur on that day? a. a hedger who goes long 0 contracts, a speculator who goes long 500 contracts b. a hedger who goes short 500 contracts, a speculator who goes long 500 contracts c. a hedger who goes long 0 contracts, a hedger who goes short 500 contracts d. a speculator who goes long 500 contracts, a speculator who goes short 0 contracts e. a hedger who goes long 500 contracts, a speculator who goes short 500 contracts

Answer 1

9]

Since it is a short position, there will a profit if the price of the futures falls.

Hence, to close the position, a buy order must be placed at 90. (buy price = short price - target profit = 100 - 10 = 90).

A limit order ensures certainty of price but not certainty of execution. A stop order ensures certainty of execution but not certainty of price. In this case, we require certainty of execution, hence a stop order should be placed.

The answer is (b) - Buy Stop 90.