Kelly Warden expects interest rates to decline and purchases a call option on Treasury bond futures. T/he exercise price on Treasury bond futures is 9432 (9432/64 percent of $100,000, or $94,500). The call option is purchased at a premium of 200 (i.e., 2 percent of $100,000), which equals $2,000. Assume that interest rates do decline and, as a result, the price of the Treasury bond futures contract rises over time to a value of 9900 ($99,000) shortly before the options expiration date. At this time, Kelly decides to exercise the option and closes out the position by selling an identical futures contract (to create an offsetting position) at a higher price than the price at which she purchased the futures.

Calculate the net gain/loss from this speculative strategy. (5 marks)