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Today (t=0) one party goes short a futures contract and another sells a forward contract on the same commodity. The prices at t = 0,
Today (t=0) one party goes short a futures contract and another sells a forward contract on the same commodity. The prices at t = 0, 1, 2, 3 where 3 = T = maturity are 0F3 = 100 1 F3 = 140 2F3 = 110 3F3 = 110 Assume that both contracts are held to maturity. Assume the commodity delivered at T = 3 is taken from previously held inventory. Assume that initial margin is met with previously bought T-Bills. The cash flows to the trader in the futures market in periods 0, 1, 2 and 3 are respectively 0, 0, 0, and +100 O 0, +40, -30 and +90 a +100, +50, -20 and +70 0 0,-40, +30 and 110 The price of a futures contract is currently 100. Which of the following orders is an inappropriate use of a stop or limit order? Buy limit 90 All of these orders might have an appropriate stop order or limit order use Sell limit 110 O Sell stop 110 Buy stop 110 o
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