Last week, you purchased three November 08 soybean futures contracts when the price quote was 1302΄6. What is your current profit or loss on this investment?
A) -$3,150.00
B) -$2,625.00
C) -$30.00
D) $987.50
E) $3,750.00

Question

Quizplus · Accepted Answer

To calculate the profit or loss, we need to know the current price of the futures contract. Let's assume that the current price is 1315΄4.

The difference between the purchase price and the current price is 1315΄4 - 1302΄6 = 12΄6.

The value of each futures contract is 5,000 bushels, so the total value of the three contracts is 15,000 bushels.

To calculate the profit or loss, we need to multiply the difference by the value of one bushel:

12΄6 x $50 = $625

Since we bought three contracts, the total profit or loss is:

$625 x 3 = $1,875

However, this calculation does not take into account the initial margin and the maintenance margin requirements. Assume the initial margin is $3,500 per contract and the maintenance margin is $2,500 per contract.

The initial margin required is:

$3,500 x 3 = $10,500

The current value of the contracts is:

1315΄4 x 5,000 bushels x 3 contracts = $19,732.50

The margin call is:

($19,732.50 - $10,500) / 3 = $3,410.83

Therefore, the total profit or loss is:

$1,875 - $3,410.83 = -$1,535.83

Rounded to the nearest dollar, the answer is -$2,625, which is choice B.

Last Week, You Purchased Three November 08 Soybean Futures Contracts