Question

Suppose you sold three September cocoa futures contracts at a price quote of 1,696. Cocoa futures contracts are based on 10 metric tons and priced in dollars per ton. What will be your profit or loss on this contract if the price turns out to be $1,607 per metric ton at expiration? -$330 $2,163 $2,322 $2,403 $2,670

Answer 1

Answer:

a gain for 2,670

Explanation:

We first calculate the difference betwene the prices

future price - expiration date = result per ton

1,696 - 1,607 = 89

We sale Cocoa in the future for 1,696

the price at expiration was        1,607

We sale at a higher price than market, this is a gain.

We have profits for $89 per ton

Each future contract has 10 tons and we sold 3 contracts

The total tons would be 3 x 10 = 30 tons

Now we multiply the gain per ton by the total tons sold

89 x 30 = 2,670

This will be the gain on future contract.