Q2. Observe the following wheat futures settlement prices on AUG 14 and AUG 15 of 2020.2/4

Wheat (CBT) 5,000bushels in one futures.

Prices are given in cents per bushel.

Delivery

Monthsettle AUG 14 20settle AUG 15 20

SEP 20327.50327.75

DEC 20331.75330.65

MAR 21342.50342.10

MAY 21346.75348.00

JUL21 352.50 351.50

Observe a trader's position at the beginning of the trading dayAUG 15 was:

10 long SEP

20 short DEC

20 short MAR30 long MAY10 long JUL

The trader did not trade on AUG 15.

Calculate the cash flows into and out of the trader's margin account by the end of trading on AUG 15. and calculate the net effect of these cash flows on the amount of capital in the trader's margin account.

Q3.Using the settlement prices on AUG 15 20 in Q2 above, explain how to open a MAR21 - JUL21 calendar spread with 50 CBT futures when a speculator expects this spread to widen over time.

Use the same format that I used in the nemrical example on the last 4 slides of CH. 2 to describe Calendar spreads.

Q4.Assume that on JAN 15, 21 the market prices are as given below:3/4

Delivery

Monthsettle JAN, 15 21

MAR21338.50

MAY21339.75

CHRISTMAS21 350.50

SEP21355.25

DEC21360.85

MAR22364.75

The speculator from Q3. closes the MAR 21 - JUL 21 calendar spread on JAN 15 21 with the settlement prices.

Show the speculator activities in the futures market and calculate the P/L from the spread.