Q4. A speculator is convinced that the stock market will fall significantly in the forthcoming months. The current market index (10 November) level is 7330 (FTSE 100). He is investigating a strategy to exploit this market fall by selling ten FTSE 100 Index futures on ICE with a March 2022 expiry, current price 7400. Contract Unit for this futures is 10 per one FTSE 100 Index point. Assume no transaction costs. Required: For the derivative (a) What would the profit (loss) be if the index rose to 7600 in March under the strategy? (b) What would the profit (loss) be if the index fell to 7450 in March under the strategy?

Q4. A speculator is convinced that the stock market will fall significantly in the forthcoming months. The current market index (10 November) level is 7330 (FTSE 100). He is investigating a strategy to exploit this market fall by selling ten FTSE 100 Index futures on ICE with a March 2022 expiry, current price 7400. Contract Unit for this futures is 10 per one FTSE 100 Index point. Assume: no transaction costs. Required: For the derivative (a) What would the profit (loss) be if the index rose to 7600 in March under the strategy? (b) What would the profit (loss) be if the index fell to 7450 in March under the strategy