An oil trader wants to do carry trade in Brent oil futures. The last price for futures with November 2020 delivery was $56.90, and for December 2020 delivery was $55.20. There are 30 days between the two contract delivery dates. Each point on the crude oil price is worth $1,000. The trader intends to hold a position of 10 contracts.

a) Should the trader buy or sell the December futures? Why?

b) Assuming the spot price of oil and the futures curve remains unchanged, what do you expect the price of December 2020 futures to be in 30 days time?

c) Calculate the total profit or loss that the trader makes if they executes the trade you specified in part (a), and the price of December 2020 futures reaches the price you specified in part (b). What additional assumptions do you have to make in your calculation?

d) After 30 days, the price of December 2020 futures has risen to $61.10. Calculate the total profit or loss if the trader executes the trade specified in part (a).