1. At the market open on October 6th, 2017, you took a short position in an April 2018 crude oil futures. Your broker, a clearing member of the NYMEX (New York Mercantile Exchange, part of the CME Group), asked for an initial margin of $3,000; the maintenance margin was set at $2,000; her brokerage fees were $20 for a round-trip, i.e., to go long (short) and later on go short (long) one contractpaid up front.

(a) At the open, what delivery price did you lock in?

(i) 51.59 (ii) 49.35 (iii) 46.2 (iv) None of the above; (v) Not enough information.

(b) If you decided to leave that position open at the end of the first day, what was your profit or loss on October 6th, 2017?

Explain briefly. Remember that the contract size is 1,000 barrels.

(c) Assuming again that you left your futures position open and assuming that there was no intra-daily marking to market (intra-day marking to market would only happen on an extremely volatile day, which was not the case on October 6h , 2016), please detail all your cash-flows on October 6th.

Suppose that we are on Friday October 6, 2017. Consider the following term structure of futures prices and trading data for WTI light sweet crude oil futures contracts on the NYMEX (actual data from 3 years ago). 10-06-2017 Session Overview Month Nov '17 Settle 48.84 Chg 2.58 Open 46.2 High 49.08 Low 45.73 Volume 410,852 Open Interest 424,445 Dec '17 49.32 2.57 46.74 49.58 46.26 145,287 297,083 Jan '18 50.01 2.54 47.44 50.19 46.99 44,674 124,095 Feb '18 50.6 2.48 48.21 50.69 47.74 19,768 80,516 Mar '18 51.21 2.49 48.75 51.3 48.38 38,491 113,184 Apr '18 51.59 2.39 49.35 51.6 48.98 10,257 36,995 May '18 51.91 2.31 49.33 52 49.33 7,126 27,004 Jun '18 52.18 2.26 50.05 52.26 49.5 37,415 109,217 Jul '18 52.32 2.15 50.54 52.39 50.54 5,443 26,808 Important information on contract specifications: (i) (ii) (iii) (iv) All prices are quoted in US dollars per barrel; The contract size is 1,000 barrels of crude oil; Those contracts are commodity settled. The November 2017 contract required delivery on Friday the 20th of October, 2017. Suppose that we are on Friday October 6, 2017. Consider the following term structure of futures prices and trading data for WTI light sweet crude oil futures contracts on the NYMEX (actual data from 3 years ago). 10-06-2017 Session Overview Month Nov '17 Settle 48.84 Chg 2.58 Open 46.2 High 49.08 Low 45.73 Volume 410,852 Open Interest 424,445 Dec '17 49.32 2.57 46.74 49.58 46.26 145,287 297,083 Jan '18 50.01 2.54 47.44 50.19 46.99 44,674 124,095 Feb '18 50.6 2.48 48.21 50.69 47.74 19,768 80,516 Mar '18 51.21 2.49 48.75 51.3 48.38 38,491 113,184 Apr '18 51.59 2.39 49.35 51.6 48.98 10,257 36,995 May '18 51.91 2.31 49.33 52 49.33 7,126 27,004 Jun '18 52.18 2.26 50.05 52.26 49.5 37,415 109,217 Jul '18 52.32 2.15 50.54 52.39 50.54 5,443 26,808 Important information on contract specifications: (i) (ii) (iii) (iv) All prices are quoted in US dollars per barrel; The contract size is 1,000 barrels of crude oil; Those contracts are commodity settled. The November 2017 contract required delivery on Friday the 20th of October, 2017