On April 1,you bought one S&P 500 index futures contract at a futures price of 950.If on June 15^th the futures price were 1012,what would be your profit (loss)if you closed your position (without considering transactions costs)?

Question

Quizplus · Accepted Answer

To calculate the profit or loss, we use the formula:
Profit/Loss = (Futures Price at Closing - Futures Price at Opening) x (value of one index point) x (number of contracts)

Value of one index point = $250 (as each index point represents $250)
Number of contracts = 1

Profit/Loss = (1012 - 950) x $250 x 1
Profit/Loss = $62 x $250 x 1
Profit/Loss = $15,500

Since the futures price went up, we have a profit of $15,500. However, we need to take into account the initial margin requirement that was set by the broker. Assuming it was 10% (a common requirement), we would have had to deposit $4,750 initially. So, we subtract that amount from our profit:

Profit/Loss = $15,500 - $4,750
Profit/Loss = $10,750

Therefore, the answer is C) $15,550 profit.

On April 1,you Bought One S&P 500 Index Futures Contract