Question
Hi help please!! It is now March 2010, and Mavis believes that in April 2010 an outbreak of ovis flu, which causes baldness in sheep,
Hi help please!! It is now March 2010, and Mavis believes that in April 2010 an outbreak of ovis flu, which causes baldness in sheep, will decrease the supply of wool and cause wool futures prices to increase by 25%.The following wool futures contracts are available at the indicated prices:
Delivery Date Contract price
March 2010 700 c/kg
June 2010 710 c/kg
September 2010 720 c/kg
If Mavis speculates by trading in four contracts (4 x 2,500 kg) of wool, clearly state what futures position she should take.What should she do to close this position in May 2010, and what profit she would realise if her expectation was exactly correct?
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