Company gains or losses from futures positions


Problem:

An oil refining company enters into 1,000 long one-month crude oil futures contracts on NYMEX at a futures price of $43 per barrel. At maturity of the contract, the company rolls half of its position forward into new one-month futures and closes the remaining half. At this point, the spot price of oil is $44 per barrel, and the new one-month futures price is $43.50 per barrel. At maturity of this second contract, the company closes out its remaining position.

Assume the spot price at this point is $46 per barrel. Ignoring interest, what are the company's gains or losses from this futures positions.

Please discuss answer in detail.

Solution Preview :

Prepared by a verified Expert
Finance Basics: Company gains or losses from futures positions
Reference No:- TGS01827335

Now Priced at $20 (50% Discount)

Recommended (93%)

Rated (4.5/5)