Question

JUULS what to facilitate trading in futures contracts? wall sellers and a seller to all buyers. Hubduces buyers and sellers to each other. c. It sets the price of the futures contracts. d. It determines the basis. (12) If the current cash price for corn is $3.40 and the curren carrying charge market. What do you expect to happen to th 40 and the current December futures price is $3.60, so the market is w you expect to happen to the cash and futures as we get closer to December? 13. The cash price is $3.40. The December futures prices is $3.60. What is the basis? $ 0.00 14. One of the measures of liquidity of a futures contract is the open interest. If I sell ten December corn contracts and I had previously bought ten December corn futures, how does the sale affect the open interes the December corn contract?

Answer 1

Answer 12) As per the concept cost and carrying charges , the future price of asset decided by spot price plus carrying charges. No -arbitrage is fundamental concept behind the future pricing. So, the price in cash market will become equal to future price. as we get closer to December.

Answer 13 ) Basis = Future price - Spot price = 3.60-3.40 = $ 0.20.

Answer 14) Open interest in a future contract is calculated as sum of  outstanding derivative contracts.

Here , buy =outstanding contract 10

Sell = outstanding contract 10

Total outstanding = 10+10 = 20

Open interest = 20 contracts.