Question
Amidst the uncertainty surrounding the fate of the Brexit deal, the sterling swung within a wide trading range as seen in the rates between 25
Amidst the uncertainty surrounding the fate of the Brexit deal, the sterling swung within a wide trading range as seen in the rates between 25 January 2019 and 19 April 2019 in the table below.
Bank dealer X performed a number of foreign currency trades on the British pounds against the US dollar during this period. She trades standard contracts (size USD100,000) with a leverage ratio of 1:200. The online broker takes a 8-pip spread on either side of the spot mid-rate. These were the dealers trades:
25 Jan 2019 to 19 Apr 2019 | US dollars per GBP (Spot, mid-rates) | Trades |
T = 0 (25 Jan 2019) | 1.3190 | Buy 5 contracts |
T = 1 | 1.2810 | Sell 8 contracts |
T = 2 | 1.3310 | Buy 4 contracts |
T = 3 | 1.3020 | Sell 6 contracts |
T = 4 (19 April 2019) | 1.2990 | Buy 5 contracts |
Required:
a. Calculate the bank dealers net profit/loss after executing all her trades. Ignore margin considerations and other transaction costs (apart from the bid-offer spread).
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