I am working on setting up the following problem and would appreciate receiving assistance:
The futures contract quote on 5,000 bushels of soybeans traded on the CBOT, Monday, December 31, 2001 was:
Open: 423-3/4 ($4.2375/bushel)
High: 424 ($4.24/bushel)
Low: 419-1/2 ($4.1950/bushel)
Settle: 421 ($4.21/bushel)
You shorted 3 contracts at $4.22 on December 31, 2001
The settlement for January 2, 2002 was $4.18 (the markets closed on New Years). If you had to post a $1,000 initial margin per contract upon placing the trade, what would be your trade account balance at the close of January 2, 2002?© BrainMass Inc. brainmass.com October 16, 2018, 11:06 pm ad1c9bdddf
Loss per bushel = 4.22-4.18 = 0.04
Total Dollar loss = .04 * 5,000 * 3 ...
The solution provides an excellent response to the question being asked. It goes into a considerable amount of detail and explains the concepts being asked very well.
Futures- Hedging, crush, basis, normal backwardation,, contango, marked-to-market, open interest, volume of trade
1. A farmer anticipates having 50,000 bushels of wheat ready for harvest in September. What would be the implications of hedging by (a) selling 8 contracts (b) selling 10 contracts, and (c) selling 12 contracts of September wheat?
2. A soybean processor intends to acquire 350,000 bushels of beans in July, process them into meal and oil, and sell these products in August. Conversion ratios are as follows:
1 bushel beans = 50 lb meal
9 lb oil
1 lb water
Put on a crush indicating the profit margin and the number of contracts to buy and sell. Prices are as follows:
July beans = $5.9275/bushel
August oil = $0.2121/lb
August meal = $247.80/ton
3. What is basis? Explain the difference between "normal backwardation" and "contango."
4. What is the meaning of "marked-to-market"? What is the difference between open interest and volume of trade?View Full Posting Details