You sold one silver future contract at $3 per ounce.What would be your profit (loss) at maturity if the silver spot price at that time is $4.10 per ounce? Assume the contract size is 5,000 ounces and there are no transactions costs.

Question

Quizplus · Accepted Answer

The profit or loss on a futures contract can be calculated as the difference between the selling price and the buying price, multiplied by the contract size. 
Profit (loss) = (Selling price - Buying price) x Contract size
In this case, the selling price is $3 per ounce, while the spot price at maturity is $4.10 per ounce. Therefore, the loss per ounce is ($4.10 - $3) = $1.10. 
The total loss would be: 
Loss = Loss per ounce x Contract size = $1.10 x 5,000 = $5,500. 
Therefore, the correct answer is D, $5,500 loss.

You Sold One Silver Future Contract at $3 Per Ounce