Catchup Company buys a contract in S&P 500 futures,taking a buy position on 1 April 2013 to 'take delivery' on 30 May 2013.A unit contract in S&P 500 futures is priced at the S&P multiplied by $25.On 1 April the S&P is 2950.By 1 May the index has dropped to 2600 and Catchup decides to close out the contract.What is Catchup's gain or loss on the futures contract?

Question

Quizplus · Accepted Answer

The initial value of the contract was 2950 x $25 = $73,750. When the index drops to 2600, the value of the contract is 2600 x $25 = $65,000. The loss for Catchup is the difference between the initial value and the value at closing, which is $73,750 - $65,000 = $8,750 or €8750 approximately. Therefore, the correct answer is B.

Catchup Company Buys a Contract in S&P 500 Futures,taking a Buy