On 6 January 2002,the All Ordinaries Index closed at 3435 points and the June 2002 SPI 200 futures was priced at 3457 points.A speculator believes that share prices are likely to fall and so decides to sell June 2002 SPI 200 futures.One week later,when the All Ordinaries Index falls to 3417 points and the June 2002 SPI 200 futures falls to 3436 points,the speculator decides to reverse her position.How much profit/loss does the speculator make?
A)$450 gain.
B)$475 gain.
C)$525 gain.
D)$525 loss.

Question

Quizplus · Accepted Answer

Initially, the speculator sold June 2002 SPI 200 futures at 3457 points. One week later, when the June 2002 SPI 200 futures fell to 3436 points, the speculator bought them back to reverse her position.

Profit/Loss = (Initial Selling Price - Reversing Buying Price) x Contract Size
Profit/Loss = (3457 - 3436) x $25
Profit/Loss = $525 gain

Therefore, the answer is C) $525 gain.

On 6 January 2002,the All Ordinaries Index Closed at 3435