Ethanol futures contracts are based on 29,000 gallons and are priced in dollars per gallon. Assume the end-of-day report on a contract show prices of: Open 2.220, High 2.231, Low 2.181, and Settle 2.186. What is the maximum profit that an investor could have earned by buying and selling one of these contracts on this day?
A) $1,131
B) $1,450
C) $942
D) $2,436
E) $986

Question

Quizplus · Accepted Answer

The maximum profit would be achieved by buying at the lowest price of the day (Low 2.181) and selling at the highest price of the day (High 2.231). The difference per gallon is 2.231 - 2.181 = $0.05. Since each contract is for 29,000 gallons, the maximum profit would be 29,000 gallons * $0.05/gallon = $1,450.

Ethanol Futures Contracts Are Based on 29,000 Gallons and Are