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Q8 Suppose, on a certain day in February, a speculator observes the following prices in the foreign exchange and currency futures markets: GBP/USD spot: 1.6465

Q8 Suppose, on a certain day in February, a speculator observes the following prices in the foreign exchange and currency futures markets:

GBP/USD spot: 1.6465

March futures: 1.6425

September futures: 1.6250

December futures: 1.6130

The speculator thinks that the markets are overestimating the weakness of sterling (GBP) against the dollar. How can she act on this view to make a profit? Under what circumstances do her actions lead to a loss?

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