1. helen luong, a currency trader for pegasus partners, uses the following futures quotes on the british pound (£) to speculate on the value of the pound. british pound futures, us$/pound (cme) contract = 62,500 pounds 1 contract is £62,500 open maturity open high low settle change interest march 1.4432 1.4471 1.4422 1.4468 0.0036 25,605 june 1.4275 1.4296 1.4267 1.4280 0.0005 809 a. if helen buys 5 june pound futures, and the spot rate at maturity is $1.4042/£, what is the value of her position? b. if helen sells 12 march pound futures, and the spot rate at maturity is $1.4632/£, what is the value of her position? c. if helen buys 3 march pound futures, and the spot rate at maturity is $1.4632/£, what is the value of her position?

(a) $7,437.5

(b) $12,300.0

(c) $3,075.0

Explanation:

(a) June settle price from the table = 1.4280

Spot price at the contract expiration = 1.4042

So, the difference in $ for each contract = 1.4280 - 1.4042  

                                                             = 0.0238

Helen has to buy for more than the spot price, so she is in loss

Helen is in loss of 0.0238 per contract

Total loss = 5 × 62500 × 0.0238

                = $7,437.5

(b) March settle price from the table = 1.4468

Spot price at the contract expiration = 1.4632

So, the difference in $ for each contract = 1.4632 - 1.4468

                                                            = 0.0164

Helen has to sell for less than the spot price, so she is in loss.

Helen is in loss of 0.0164 per contract .

Therefore,

Total loss = 12 × 62500 × 0.0164

                = $12,300.0

(c) March settle price from the table = 1.4468

Spot price at the contract expiration = 1.4632

So, the difference in $ for each contract = 1.4632 - 1.4468

                                                                   = 0.0164

Helen has to buy for less than the spot price, so she is in gain .

Helen is in gain of 0.0238 per contract .

Total loss = 3 × 62500 × 0.0164

                = $3,075.0

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