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Use the following information for questions 1 - 4. Soybean futures trade in contracts of 5,000 bushels and are prices are quoted in cents per
Use the following information for questions 1 - 4. Soybean futures trade in contracts of 5,000 bushels and are prices are quoted in cents per bushel. Gold futures trade in contracts of 100 ounces and prices are quoted in dollars per ounce. S&P 500 E-mini futures trade in contracts with multiples of $50 times the quoted price which is in dollars. 2. A speculator believes that the price of soybeans will fall in the short term. The current soybeans spot price is 1292 and the current October futures price is 1306. The speculator intends to open a futures position in 50 soybeans futures contracts. The initial margin is $4,725 per contract, with a maintenance margin of $3,500. a. Will the speculator open a long or short futures position? b. What is the speculator's initial margin investment? C. Suppose that in September the October futures price is 1290 and the speculator decides to close out the position. What will be the speculator's profit/loss on the futures position and return on the investment? d. Suppose instead that in September the October futures price is 1342 and the investor chooses to close out the position. What is the speculator's profit/loss on the futures position and return on investment? e. If the speculator has a strategy to take profits if the return on his investment is at least 5%, and to limit losses to less than 2%, what are the October futures prices at which he would close out his position
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