Draw a futures curve in backwardation. Label the spot price, the 3m futures price and the 6m futures price.

Spot: 15

1m: 16

2m: 17

3m: 18

Above are the prices of spot silver (the price of silver for delivery today), and the 1,2, and 3m silver futures prices.

B. You buy the 3m silver future. What price of silver have you just locked in for delivery in 3m?

C. 1 month goes by. The futures curve has not changed at all. What is the price of the silver future that you bought now?

D. 2 months go by. The futures curve has not changed at all. What is the price of the silver future that you bought now?

D. 3 months go by. The futures curve has not changed at all. What is the price of the silver future that you bought now? What is your profit or loss on the silver if you are to sell your silver future right before it expires?