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2 April, 19:30

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

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  1. 2 April, 19:31
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    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
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