Question
1. Daily settlement with a futures contract A speculator bought a CME British pound futures contract (62,500) four days ago at the rate of $1.25/
1.Daily settlement with a futures contract
A speculator bought a CME British pound futures contract (62,500) four days ago at the rate of $1.25/ and closes the position today at the rate of $1.26/. During the four-day investment horizon, the same futures contract with the same maturity was sold at the following prices:
Day 0: Position open at the rate of $1.25/
Day 1: $1.26/
Day 2: $1.28/
Day 3: $1.27/
Day 4: $1.26/
a.Calculate the daily gain/loss for the four days.
b.What is the total gain/loss from this investment?
c.Answer the above two questions assuming the speculator short the contract instead of long (buy) the contract.
2. Draw a profit profile of the following options and indicate 1) what is the break-even price, 2) what is the maximum gain, and 3) what is the maximum loss. (Hint: refer to textbook page 290-293, exhibit 8.5, 8.6, 8.7 and 8.8)
a.Buyer of a call option with exercise price X=$1.30/, and premium of $0.20/.
b.Seller of a call option with exercise price X=$1.30/, and premium of $0.20/.
c. Buyer of a put option with exercise price X=$1.30/, and premium of $0.20/.
d. Seller (writer) of a put option with exercise price X=$1.30/, and premium of $0.20/.
Does anyone can help me for this homework? Thanks!
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