Question

Suppose you sold a futures contract on gold 3 months ago when the futures price was $1,350 per ounce. Each contract is on 100 ounces of gold. The contract is closed out today. The current futures price is $1,340.
Part a. What was your position?
Part b. What was the buyer’s position?
Part c. Calculate your loss/gain on the contract

Answer 1

Answer: The answers are provided below

Explanation:

a. What was your position?

My position will be the difference between the past future price when I sold the good and the current future price which is then multiplied by the contract size. This will be:

= ($1,350 - $1,340) × 100

= $10 × 100

My position = $1,000

b. What was the buyer’s position?

The buyer's position will be the opposite of mine. This will be:

= ($1,340 - $1,350) × 100

= -$10 × 100

= -$1000

Buyer's position = -$1,000

c. Calculate your loss/gain on the contract.

The profit will be the difference between the selling price and the closing price multiplied by the contract size. This will be:

= ($1,350 - $1,340) × 100

= $10 × 100

= $1,000

My profit = $1,000