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Use the AAPL option chain for questions 5-8. Remember that if it is stated that 20 contracts are to be used, this means 20 contracts
Use the AAPL option chain for questions 5-8. Remember that if it is stated that 20 contracts are to be used, this means 20 contracts of each option that may be part of a strategy. would close out his position? a. 3. Suppose in June 2021 the spot price of gold is $1,615 and that there is a June 2022 gold futures contract (with an initial margin of $3,800) priced at $1,721. Storage and insurance costs are $2.50 per ounce per year, a broker charges $12,500 annually to borrow 100 ounces of gold, and the risk- free rate is 2.0%. Is the relationship between the spot and futures price of gold set up for a cash and carry arbitrage opportunity or a reverse cash and carry arbitrage opportunity? Explain how you know this. b. What is the arb's total cash flow per contract in June 2021? What is the arb's total cash flow per contract in June 2022? d. What is the arb's profit per contract in June 2022? e. Suppose instead that the June 2022 gold futures price is $1,488. Which arbitrage strategy does this present? Using such a strategy, answer questions b), d) above. f. What are the carry costs per ounce for the cash and carry strategy? For the reverse cash and carry strategy? C. Use the AAPL option chain for questions 5-8. Remember that if it is stated that 20 contracts are to be used, this means 20 contracts of each option that may be part of a strategy. would close out his position? a. 3. Suppose in June 2021 the spot price of gold is $1,615 and that there is a June 2022 gold futures contract (with an initial margin of $3,800) priced at $1,721. Storage and insurance costs are $2.50 per ounce per year, a broker charges $12,500 annually to borrow 100 ounces of gold, and the risk- free rate is 2.0%. Is the relationship between the spot and futures price of gold set up for a cash and carry arbitrage opportunity or a reverse cash and carry arbitrage opportunity? Explain how you know this. b. What is the arb's total cash flow per contract in June 2021? What is the arb's total cash flow per contract in June 2022? d. What is the arb's profit per contract in June 2022? e. Suppose instead that the June 2022 gold futures price is $1,488. Which arbitrage strategy does this present? Using such a strategy, answer questions b), d) above. f. What are the carry costs per ounce for the cash and carry strategy? For the reverse cash and carry strategy? C
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