Question

Module 17 Learning Activity

A currency trader uses the Swiss franc futures quotes below to speculate on the value of the Swiss franc. Use the table below to answer the questions that follow it.. Ignore transactions costs and daily resettlement.

a. If the trader buys 5 June Swiss franc futures, and the spot rate at maturity is $0.7963/CHF, what is the value of their position?
b. If the trader sells 12 March Swiss franc futures, and the spot rate at maturity is $0.8963/CHF, what is the value of their position?
c. If the trader buys 3 March Swiss franc futures, and the spot rate at maturity is $0.8963/CHF, what is the value of their position?
d. If the trader sells 12 June Swiss franc futures, and the spot rate at maturity is $0.7963/CHF, what is the value of their position?

Month: Swiss franc futures contract settle price, S/CHF 1 contract = CHF62.500
March: 0.8528
June: 0.8234 ​

Answer 1

a. The trader buys 5 June Swiss franc futures at a settlement price of 0.8234. The value of the position is:

Value = (Settlement price - Purchase price) x Contract size x Number of contracts

Value = (0.7963 - 0.8234) x CHF62.500 x 5

Value = -0.0271 x CHF312,500

Value = -CHF8,687.50

Therefore, the value of the trader's position is -CHF8,687.50.

b. The trader sells 12 March Swiss franc futures at a settlement price of 0.8528. The value of the position is:

Value = (Sale price - Settlement price) x Contract size x Number of contracts

Value = (0.8963 - 0.8528) x CHF62.500 x 12

Value = 0.0435 x CHF750,000

Value = CHF32,625

Therefore, the value of the trader's position is CHF32,625.

c. The trader buys 3 March Swiss franc futures at a settlement price of 0.8528. The value of the position is:

Value = (Settlement price - Purchase price) x Contract size x Number of contracts

Value = (0.8963 - 0.8528) x CHF62.500 x 3

Value = 0.0435 x CHF187,500

Value = CHF8,156.25

Therefore, the value of the trader's position is CHF8,156.25.

d. The trader sells 12 June Swiss franc futures at a settlement price of 0.8234. The value of the position is:

Value = (Sale price - Settlement price) x Contract size x Number of contracts

Value = (0.7963 - 0.8234) x CHF62.500 x 12

Value = -0.0271 x CHF750,000

Value = -CHF20,325

Therefore, the value of the trader's position is -CHF20,325.

Step-by-step explanation: