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Section 2 In Jan 2019, a trader (as a speculator) begins to use stack-and-roll trading strategy to long oil. He uses futures contracts expiring within half a year and having liquidity to trade. The table below lists the three futures contracts that he uses. Futures price is quoted for one barrel of oil. The trader closes his last contract position in July 2019. A) What is the dollar gain/loss per barrel of oil from this stack-and-roll strategy? (2 marks) B) Does the trader face basis risk? Why? (2 marks) C) Suppose the October 2019 futures price drops to -$37.00 (a negative price) per barrel in July 2019. What is the dollar gain/loss per barrel of oil from this stack-and-roll strategy? (1 mark) Date Jan 2019 Mar 2019 May 2019 July 2019 $49.20 $51.80 May 2019 futures price $51.00 $53.30 July 2019 futures price $53.50 $54.00 October 2019 futures price Section 2 In Jan 2019, a trader (as a speculator) begins to use stack-and-roll trading strategy to long oil. He uses futures contracts expiring within half a year and having liquidity to trade. The table below lists the three futures contracts that he uses. Futures price is quoted for one barrel of oil. The trader closes his last contract position in July 2019. A) What is the dollar gain/loss per barrel of oil from this stack-and-roll strategy? (2 marks) B) Does the trader face basis risk? Why? (2 marks) C) Suppose the October 2019 futures price drops to -$37.00 (a negative price) per barrel in July 2019. What is the dollar gain/loss per barrel of oil from this stack-and-roll strategy? (1 mark) Date Jan 2019 Mar 2019 May 2019 July 2019 $49.20 $51.80 May 2019 futures price $51.00 $53.30 July 2019 futures price $53.50 $54.00 October 2019 futures price