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Futures Contango Trading Simulation #2 F2 In this trading simulation, you can purchase or sell futures contracts on crude oil [CL-1F). You can also trade

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Futures Contango Trading Simulation #2 F2 In this trading simulation, you can purchase or sell futures contracts on crude oil [CL-1F). You can also trade physical crude [spot crude). The futures contract is a commitment to take or make delivery at the end of the 1-month trading period. At the end of the month, the contract will settle and if you are long (short), you will need to take (make) delivery of crude. Each contract represents 1000 barrels of crude oil. The spot market for crude [CL] trades as individual barrels which means purchasing 1 unit of CL will result in owning 1 barrel of crude oil. Storage tanks are available to be leased at any time. These containers each hold a maximum of 10,000 barrels of crude oil. The cost for leasing a storage tank is $1000 per day. The case represents 1 month [20 trading days) of time, and that month is simulated over 10 minutes of trading time. Discussion Questions and Follow Up: [1) What are the correct optimization ratios to make a complete arbitrage prot [i.e. how many barrels, futures and storage do you use at once?)

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