On 31 December 2001,the All Ordinaries Index closed at 3427 points and the September 2002 SPI 200 futures was priced at 3473 points.A speculator believes that share prices are likely to fall and so decides to sell September 2002 SPI 200 futures immediately.One week later,when the All Ordinaries Index rises to 3435 points and the September 2002 SPI 200 futures falls to 3471 points,the speculator decides to reverse her position.How much profit/loss does the speculator make?
A)$200 loss.
B)$1100 gain.
C)$950 gain.
D)$50 gain.

Question

Quizplus · Accepted Answer

The speculator initially sells the September 2002 SPI 200 futures at 3473 points and later buys them back at 3471 points. The difference is 2 points in the speculator's favor. Since each point on the SPI 200 futures contract is worth $25, the total profit is 2 points * $25 = $50.

On 31 December 2001,the All Ordinaries Index Closed at 3427