QUESTION $4$

Consider a situation where you plan to trade a long$-$the$-$basis position with these criteria:

You plan to buy corn in August at a basis of $+10$ SEP.

You expect to sell corn in February at a basis of $+50$ MAR.

The corn will be held for approximately $6$ months at a total cost$-$of$-$carry of $15//$bushel$.$

The only component not locked in is the spread. Calculate the outcome of the basis transaction in three different circumstances, each using the same criteria as shown above, but with these three different spread possibilities:

If you set a pre$-$spread from SEP to MARCH at a $10$ inversion, what would your net margin be$?$

If you set a pre$-$spread from SEP to MARCH at a $15$ carry, what would your net margin be$?$

If you set a pre$-$spread from SEP to MARCH at a $306$ carry, what would your net margin be

QUESTION $5$

If you wanted to set a pre$-$spread that would put you in position to purchase cash corn at the ele of September and sell it in April, how would you enter the futures order?

Buy futures and Sell futures.