Question
On March 1, 2020, the gold spot price was $1100/oz and 5-month Futures price was $1200/oz. The term structure of interest rates was flat (i.e.,
On March 1, 2020, the gold spot price was $1100/oz and 5-month Futures price was $1200/oz. The term structure of interest rates was flat (i.e., all zero rates were the same). During 1 month (from March 1st to April 1st), the spot price increased to $1115 while the Futures price on this contract decreased to $1190. On April 1st, the interest rate structure was flat as well. The size of the futures contract is 1oz and futures prices are always equal to forward prices
Assume on March 1, 2020 you bought a 1-month call option on a Futures contract that matures on August 1, 2020 for $145 with a strike price of $1070. Ignoring time value of money, what is your profit or loss from this option as of April 1, 2020?
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