Derivatives Q24

24Ali takes a long position in 50 futures contracts on Day 1. The futures have a daily price limit of €10 and closes with a settlement price of €105. On Day 2, the futures trade at €115 and the bid and offer move to €116 and €118, respectively. The futures price remains at these price levels until the market closes. The marked-to-market amount the trader receives in his account at the end of Day 2 is closest to:

Option : A
Explanation : Because the future has a daily price limit of €10, the highest possible settlement price on Day 2 is €115. Therefore, the marked to market value would be (€115 - €105) * 50 = €500.

Forgot your password?

I agree with the Terms.