You sold one silver future contract at $2 per ounce. What would be your profit (loss) at maturity if the silver spot price at that time is $3.50 per ounce? Assume the contract size is 5,000 ounces and there are no transactions costs.

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Quizplus · Accepted Answer

Selling a futures contract means you agree to sell an asset at a set price at a future date. If the spot price at maturity is higher than the contract price, you incur a loss because you must sell the asset at a lower price than the market price. The loss per ounce is $1.50 ($3.50 - $2.00). For 5,000 ounces, the total loss is $7,500 (5,000 ounces * $1.50).

You Sold One Silver Future Contract at $2 Per Ounce