You sell 10 gold futures contracts when the futures price is $342.70 per ounce (each contract is for 100 ounces). The price on the maturity date is $302.30. What is your payoff?
A) -$40,400
B) -$4,040
C) $404
D) $4,040
E) $40,400

Question

Quizplus · Accepted Answer

The payoff from selling futures contracts is positive if the price decreases, which it did from $342.70 to $302.30, a decrease of $40.40 per ounce. Since each contract is for 100 ounces and you sold 10 contracts, the total payoff is 10 contracts * 100 ounces/contract * $40.40/ounce = $40,400.

You Sell 10 Gold Futures Contracts When the Futures Price