Question

You decided to speculate in the market and sold six platinum futures contracts when the futures price was $1,391.20 per troy ounce. the price on the contract maturity date was $1,395. the contract size is 50 troy ounces. what was your total profit or loss on the settlement day if you had to cover your position in the spot market?

Answer 1

The total loss from selling six platinum futures contracts and covering the position in the spot market on the settlement day would be $1,140.

Step-by-step explanation:

To calculate the total profit or loss from selling six platinum futures contracts, one needs to consider the initial futures price, the price at contract maturity, the contract size, and the number of contracts sold. The initial futures price was $1,391.20 per troy ounce and the price on the contract maturity date was $1,395 per troy ounce. Each contract is for 50 troy ounces.

The loss per contract is calculated by taking the difference between the buying price and the selling price, and then multiplying by the contract size:

Loss per contract = ($1,395 - $1,391.20) × 50 = $3.80 × 50 = $190

Since six contracts were sold, the total loss would be:

Total loss = $190 × 6 = $1,140

The investor would face a total loss of $1,140 on the settlement day after covering the position in the spot market.