Answer to Question #131329 in Finance for London Williams

Question #131329

Suppose that a trader enters into a long futures position for 1000 oil barrels with a delivery date on December 2016 and a future price of $40 per barrel. Suppose that on delivery date, the spot price of oil is $45 per barrel. What is the payoff to the long position?


1
Expert's answer
2020-09-01T11:22:02-0400

Spot price per barrel at maturity date p_{1}=45

Future price for each barrel F_{0}=40

Payoff of the future contract (long position) =P_{1}-F_{0}=(45-40)\times1000

=5000



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