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Futures Contracts: Gains or Losses from Future Positions

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An oil refining company enters into 1,000 long one-month crude oil futures contracts on NYMEX at a futures price of $43 per barrel. At maturity of the contract, the company rolls half of its position forward into new one-month futures and closes the remaining half. At this point, the spot price of oil is $44 per barrel, and the new one-month futures price is $43.50 per barrel. At maturity of this second contract, the company closes out its remaining position. Assume the spot price at this point is $46 per barrel. Ignoring interest, what are the company's gains or losses from its futures positions?

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Solution Summary

The solution discusses gains and losses from a company's future positions.

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Answer:
Given that,
Number of future contracts=1,000
Future ...

Solution provided by:
Jayant Kumar, MBA
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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