A trader enters into a short forward on cotton for 37 contracts with delivery in 17...
A trader enters into a short forward on cotton for 37 contracts with delivery in 17 months. The forward price is $0.55 per pound. The delivery size is 18000 pounds. What is the trader's profit if the price of cotton in 17 months is $0.51 per pound?
Homework Answers
Contract size 18000 pounds
Short selling forward rate of futures of 17 months= $
0.55
closing rate or buying rate in 17 months( position will be closed
by doing opposite transaction on closing day)= $
0.51
Profit or loss on futures =(Seling rate - Closing or buying
rate)*Contract size
(0.55-0.51)*18000
=$720
So traders profit is $720
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A trader enters into a short forward on cotton for 37 contracts
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