Question

Today is June. Suppose you buy a futures contract for 42,000 gallons of RBOB gasoline delivered in December. The contract settles at $1.50 per gallon today. You decide to exit in August, when the contract settles at $1.45 per gallon. Calculate your payoff from holding the position between June and August

Answer 1

The payoff from holding the position between June and August is $2,100 "loss"

Step-by-step explanation:

Since I had gone long on the contract and it has gone down in value, I would be having a loss. The value of the loss will be:

= ($1.5 - $1.45) x 42,000 gallon of RBOB gasoline

= $0.05 * 42,000 gallon of RBOB gasoline

= $2,100 (Loss)