December 2017 crude oil futures contracts are currently trading at about $40/bbl. Assume that you have reliable inside information not yet available to the public that the Obama administration will soon allow oil drilling in currently protected oil-rich areas of Alaska, creating a significant increase in the supply of crude oil. a. Explain how you would use this information to speculate in the futures market.

b. If the actual spot rate for oil in December turns out to be $38 (5% below $40), and you have one contract for 1000 barrels, did you make or lose money? How much?

c. If the actual spot rate for oil in December turns out to be $44 (10% above $40), and you have one contract, did you make or lose money? How much?