Asked by Albin Mathew on Jul 11, 2024
Verified
If you took a short position in two S&P 500 futures contracts at a price of 3,510 and closed the position when the index futures was 3,492, you incurred
A) a gain of $9,000.
B) a loss of $9,000.
C) a loss of $18,000.
D) a gain of $18,000.
E) None of the options are correct.
Short Position
The futures trader committing to deliver the underlying asset.
S&P 500 Futures
Financial contracts that speculate on the future value of the S&P 500 index, allowing investors to predict and hedge against market movements.
Position
An investment holding or the amount of a particular security, commodity, or currency that an investor owns or has contracted to buy or sell.
- Assess the influence of fluctuations in futures prices on the methods for portfolio management and hedging strategies.
Verified Answer
RR
Redencion ReyesJul 15, 2024
Final Answer :
A
Explanation :
In futures trading, a short position profits when the price decreases. Here, the price decreased from 3,510 to 3,492, a difference of 18 points. Each S&P 500 futures contract represents $250 per point, so the profit per contract is 18 points * $250 = $4,500. With two contracts, the total gain is $4,500 * 2 = $9,000.
Learning Objectives
- Assess the influence of fluctuations in futures prices on the methods for portfolio management and hedging strategies.
Related questions
You Own a $15 Million Bond Portfolio with a Modified ...
A Farmer Sells Futures Contracts at a Price of $2 ...
An Investor with a Short Position in Treasury Notes Futures ...
In Volatile Markets, Dynamic Hedging May Be Difficult to Implement ...
Options Sellers Who Are Delta-Hedging Would Most Likely ...