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Suppose you have S10,000 to invest and you follow the strategy to leverage your exposure to the copper market. Copper is selling at $4 a
Suppose you have S10,000 to invest and you follow the strategy to leverage your exposure to the copper market. Copper is selling at $4 a pound and the margin requirement for a futures contract for 25,000 pounds of copper is $10,000. Your trading costs are S100. a. Calculate your return if you bought the future and copper prices rise to $4.50 a pound. b. How does this compare with the return you would have made if you have simply purchased $10,000 worth of copper and sold it a year later at $4.50? c. What are your returns with the future if copper falls to S3/pound? d. What are your returns if you bought $10,000 worth of copper at S4/pound and it falls to S3/pound
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