Question

Suppose you buy one contract for December 2017 delivery at the closing price. If the contract closes in December at a price of $4 per bushel, what will be your profit or loss? (Each contract calls for delivery of 5,000 bushels.)

Answer 1

Answer: $ 587.5 gain

Explanation:The December maturity futures price today is $3.8825 per bushel. If the contract closes at $4 per bushel in December, your profit / loss on each bushel will be the closing price you receive in December less the futures purchase you contracted for today, multiplied by the number of bushels per contract (for delivery of 5,000 bushels of corn)

or:

(($4 - $3.8825) x 5000)

($0.1175 x 5000)= $ 587.5 gain.