Question

A trader sold short a cotton futures contract @ 76.12 cents per pound. The contract size is 50,000 pounds. How much does the trader gain or lose in DOLLARS if he closed out his contract when the futures price is 72.41 cents per pound? Keep zero decimal points. If it is a loss, please enter a negative number.

Answer 1

Answer:

Gain of  $1,855    

Explanation:

Data provided in the question:

Actual Selling price = 76.12 cents per pound = $0.7612 per pound

Price at the closing = 72.41 cents per pound = $0.7241 per pound

The size of the contract = 50,000

Now,

The gain or loss = (Actual selling price - Price at closing ) × size of contract

= ( $0.7612 - $0.7241 ) × 50,000

= 0.0371 × 50,000

= $1,855          [positive value mean gain ]

Hence,

Gain of  $1,855