_________________ from the value of ________________________.(2 points)
A contract by which I will sell $100,000 of bonds at a percentage-of-par price of 97.500 for delivery in June 2021. The contract is listed on an exchange and the rules of the exchange specify when in June the delivery takes place, and the method of payment. The contract is settled through the exchange clearing house.
Forward or futures? _________
Which type of contract is this? (Highlight the correct answer) (2 points)
forward futures call option put option
Suppose you have the opinion that the price of crude oil will increase.
You are a grain merchant with an inventory of 2,000,000 bushels of soybeans to sell in the coming months. The price of corn is high now at $11.70/bushel but there is a risk that the price may decline as we move into harvest season.
The derivatives market you decide to use to hedge is the May 2021 Soybean Futures market; its price now is $11.75/bushel. The notional amount of one futures contract is 5,000 bushels.
The price at which you sell the soybeans is $12.50/bushel. How much money in total do you receive for the sale?
The price of the May 2021 soybean futures at that time is 12.60/bushel. Has your hedge made a profit or a loss? How much?
You sell a March 19 $3.60/pound put option on 25,000 pounds of copper at a premium of $0.20/pound. The current price of copper is $3.58/pound.
Is it a right to buy copper or to sell copper?
When does the option expire?
What is the underlying market for this option?
What is the exercise price/strike price of the option?
Did you pay or receive a premium? How much/pound? How much total?
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