On 12 January, WA Co., an Australian company will receive Thai baht (THB) in March from a
Question:
On 12 January, WA Co., an Australian company will receive Thai baht (THB) in March from a Thai importer. Therefore, it sells a futures contract specifying THB2 million and a March settlement date (which is 23 March for this contract). On 12 January, the futures contract is priced at A$0.2400 per THB. On 14 February, WA Co. has received an email from the Thai importer that the order has been cancelled due to unavoidable circumstances. Therefore, WA Co. no needs to sell a futures contract for THB in March. It buys a futures contract on THB2 million with the March settlement date to offset the contract it sold in January. At this time, the futures contract is priced at A$0.2832 per THB. Calculate the profit or loss in Australian dollar (A$) (ignore the margin requirements) that WA Co. incurs due to closing its' March futures contract position.