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Futures and Call Options

Please show calculations for the problems listed below. Thanks

1. You just bought two April S&P 500 index futures contracts at a futures price of $400. If the April futures price is $380 one month later, you will have realized a _______ if you close your position.

$380 profit
$380 loss
$10,000 profit
$10,000 loss

2. Question: The current level of the S&P 500 index should be __________ if the futures price for a contract on the S&P 500 that will expire 6 months from now is $808, the dividend yield on the S&P 500 is 2%, and the risk-free interest rate is 4%.

816
808
800
828

3. You just bought 100 shares of Microsoft for $80 per share and sold one Microsoft March 82 call contract for a call premium of $2. The maximum loss that you could realize from this strategy is

$8,400
$7,800
$8,000
$8,200

Solution Preview

1. You just bought two April S&P 500 index futures contracts at a futures price of $400. If the April futures price is $380 one month later, you will have realized a _______ if you close your position.
$380 profit
$380 loss
$10,000 profit
$10,000 loss

D) The loss of each futures is (400-380) = 20
It is commonly assumed that each contract requires $500 times the index ...

Solution Summary

3 multiple choice questions on the subject are answered and explained.

$2.19