Question

Suppose you purchase a May 2017 coffee futures contract on this day at the last price of the day. Use Table 23.1

What will your profit or loss be if coffee prices turn out to be $1.4567 per pound at expiration? (Do not round intermediate calculations. Enter your answer as a positive value and round your answer to 2 decimal places, e.g., 32.16.)

Table 23.1:

Sample Wall Street Journal Futures Price Quotations TABLE 23.1 Metal &Petroleum Futures Contract Op en open lHligh hilo Low Settle Settle Chg interest Coffee (ICE-US)-37.500 lbs; cents per lb. March May Sugar-World (ICE-US)-112,oo0 lbs; cents per lb. March May Sugar-Domestic (ICE-US)-112,000 lbs; cents per lb. May July Cotton (ICE-US)-50,000 lbs; cents per lb March May Orange Juice (ICE-US)-15,00o lbs; cents per lb. March May 142.85 145.20 2.30 43.558 145.25 147.60 143.40 145.70 145.95 148.05 2.30 73,254 20.65 11 220,619 -,08 224.526 20.74 21.03 20.62 20.65 20.61 20.72 20.97 30.40 .07 30.40 30.40 30.32 946 30.40 30.40 30.39 30.40 1,768 76.13 75-43 75.25 75-58 76.65 33 104.332 6.4077-30 76.40 .22 97,772 7438 172.65 175.00 167.80 171.55 174.00 166.80 168.75 1.00 169.75 60 3-434

Answer 1

Solution:

Purchase price of the May 2017 Coffee Futures = Settlement Price = 147.60 Cents = $1.4760

As it a Long Position, the buyer will make a profit if the price of coffee rises and will suffer a loss if the price of Coffee falls.

Calculation of Profit or Loss, if the Coffee price turns out to be $1.4767 per pound on expiration:

As the price of coffee has increase, the buyer of the Futures contract will make a profit.

Profit to the Buyer = Price on Expiration - Purchase Price

= $1.4767 - $1.4760 = $0.0007 per pound or 0.07 Cents per pound.