Question

Problem 7-1 (algorithmic) Question Help Saguaro Funds. Tony Begay, a currency trader for Chicago-based Saguaro Funds, uses futures quotes on the British pound (£) to speculate on the value of the pound. Use the futures quotes in the table below to answer the following questions. British Pound Futures, US$/pound (CME) Maturity Open High Low March 1.4246 1.4268 1.4214 June 1.4164 1.4188 1.4146 Settle 1.4228 1.4162 Contract = 62,500 pounds Change High Open Interest 0.0032 1.4700 25,605 0.0030 1.4550 809 a. If Tony buys 5 June pound futures, and the spot rate at maturity is $1.3976/£, what is the value of her position? b. If Tony sells 12 March pound futures, and the spot rate at maturity is $1.4564/£, what is the value of her position? c. If Tony buys 3 March pound futures, and the spot rate at maturity is $1.4564/£, what is the value of her position? d. If Tony sells 12 June pound futures, and the spot rate at maturity is $1.3976/£, what is the value of her position? a. If Tony buys 5 June pound futures, and the spot rate at maturity is $1.3976/£, what is the value of her position? The value of Tony's position is 6 (Round to the nearest cent. Use a minus sign if value is negative.)

Answer 1

		For SELL position, there will be gain if Price at maturity is higher than trade rate
			A	B=A*62500	C	D	E		F=B*E
			Number of Contracts	Total Contract in Pounds	Future Trade Rate Dollar/Pound	Spot Rate on Maturity (Dollar/Pound)	Gain/(Loss) per Pound	CALCULATION	Value of Tony's Position
	a	Buy 5 June Pound Futures	5	£        312,500	$1.4162	$1.3976	($0.0186)	(1.3976-1.4162)	-$5,812.50
	b	Sell 12 March Pound Futures	12	£        750,000	$1.4228	$1.4564	($0.0336)	(1.4228-1.4564)	-$25,200.00
	c	Buy 3 March Pound Futures	3	£        187,500	$1.4228	$1.4564	$0.0336	(1.4564-1.4228)	$6,300.00
	d	Sell 12 June Pound Futures	12	£        750,000	$1.4162	$1.3976	$0.0186	(1.4162-1.3976)	$13,950.00
		NOTE: For Buy position, there will be gain if Price at maturity is higher than trade rate
		For SELL position, there will be gain if Price at maturity is lower than trade rate
			ANSWER:
			a	-$5812.50	b=-$25,200	c=$6,300	d=$13,950