1. The standard size of a gold futures contract trading on the Chicago Mercantil

Question

1. The standard size of a gold futures contract trading on the Chicago Mercantile Exchange is 100 troy ounces. Prices are quoted as dollars and cents per troy ounce and the contract calls for physical delivery at maturity. Consider the following data on gold futures trading on February 21 2013: Month Charts Last Change Prior Settle Open High Low Volume Hi / Lo Limit Updated Feb 2013 1570.8 -6.8 1577.6 1568.5 1572.5 1554.5 a 720 No Limit 7:58:24 AM CT 2/21/2013 Mar 2013 1568.0 -9.5 1577.5 1564.3 1573.3 1554.1 328 No Limit 8:03:22 AM CT 2/21/2013 Apr 2013 1568.4 -9.6 1578.0 1564.8 1574.6 1554.3 110,944 No Limit 8:04:34 AM CT 2/21/2013 Jun 2013 1570.4 -9.4 1579.8 1566.8 1575.9 1556.4 2,001 No Limit 8:03:20 AM CT 2/21/2013 You buy 50 April 2013 gold futures contracts at the last price. a. Are you long or short the futures contracts? What are you committing to buy or sell on the maturity (delivery) date? How much will you pay or receive in dollars per contract? What is the total amount that you will pay or receive? b. Suppose that the spot price of gold on the April delivery date is $1550. Are your profits on the purchase of the contracts positive or negative? What are your per unit (i.e., per troy ounce) profits? What are your per contract profits? What are your total profits? (Note: we are ignoring brokerage fees.) c. Consider the trader that sold the 50 April 2012 gold futures contracts at the last price above. At maturity, has this trader profited? Calculate the trader

Explanation / Answer

short future contract negative and for the later futures should be taken on long

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