Suppose that you sold a futures contract for $3.75 per bushel and the contract ended at $3.60 after several days of closing prices of $3.80, $3.70, $3.65, $3.70, $3.65, and $3.60. What would the mark to market sequence be? (Cash flow per bushel, in $.)
A)−0.05, 0.10, 0.05, −0.05, 0.05, 0.05
B)0.05, −0.10, −0.05, 0.05, −0.05, −0.05
C)−0.05, 0.05, 0.10, 0.05, −0.09, −0.15
D)0.05, −0.05, −0.10, −0.05, −0.09, −0.015

Question

Quizplus · Accepted Answer

- After the first day, the mark to market calculation is 0.05 because the closing price of $3.80 is higher than the contract price of $3.75 (0.05).
- After the second day, the mark to market calculation is -0.10 because the closing price of $3.70 is lower than the previous day's closing price of $3.80 (-0.10).
- After the third day, the mark to market calculation is -0.05 because the closing price of $3.65 is only slightly lower than the previous day's closing price of $3.70 (-0.05).
- On the fourth day, the mark to market calculation is 0.05 because the closing price of $3.70 is higher than the previous day's closing price of $3.65 (0.05).
- On the fifth day, the mark to market calculation is 0.05 because the closing price of $3.65 is the same as the previous day's closing price (0.05).
- On the sixth day, the mark to market calculation is 0 because the closing price of $3.60 is the same as the contract price.

Suppose That You Sold a Futures Contract for $3