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Energy Trading

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Suppose you constructed a bull call spread contract using March natural gas futures (size: 10,000 MMBtu). Call premium is $0.30 for $4.20 strike price per MMBtu. Call premium is $0.25 for $4.50 strike price per MMBtu. Compute your net profit or loss per contract (10,000 MMBtu) for the following possible March natural gas futures prices at expiration.
a. $4.00 per MMBtu
b. $5.00 per MMBtu

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Solution Summary

This solution discusses energy trading.