1. A trader buys a July futures contracts on frozen orange juice. Each contract is for the delivery of 15,000 pounds. The current futures price is 160 cents per pound, the initial margin is $6,000 per contract, and the maintenance margin is $4,500 per contract.

1. If the tick size is $0.01/pound, what is the dollar value of each tick?
2. At what contract price (in cents per pound) will a margin call be issued.

2. Look up on www.cmegroup.com the current futures quotes for WTI Crude Oil for 11/2020 and 06/2021 contracts.

1. The price curve shows this product is in a ____ (contango/backwardation) market.
2. If you trade a spread on this product between these dates and price rallies, the spread will ____ (widen/narrow/stay the same).
3. If price is expected to rally (a bull market), your strategy is to ____ the near term contract and ____ deferred term contract.

3. You own a stock portfolio with market value of $600,000, with a weighted average beta of 0.87. You want to hedge this portfolio from price volatility using the E-mini S&P500 index future (ES) with a price of 50xIndex value.

1. How many contracts do you need to fully hedge your portfolio if the 1-mo S&P500 Index is currently priced at 3,477? (round to the nearest whole number)
2. If you shorted 2 ES contracts and the index moves to 3,440 in a month, what will be your net gain (+) or loss (-) (must state gain or loss) for your entire position (i.e., your portfolio + the hedge)? [Hint: first compute the % change in index and portfolio values]

4. According to the spot-futures parity relationship, what should be the 3-month futures price of the WTI crude oil contract if the current spot price is $40.52 per barrel and the monthly cost of carry is 0.8%?