The price of a stock on July 1 is $114. A trader buys 500 call options on the stock with a strike price of $120 when the option price is $4. The options are exercised when the stock price is $130. The trader’s net profit is

A company enters into a short futures contract to sell 100,000 units of a commodity for 35 cents per unit. The initial margin is $4,000 and the maintenance margin is $3,000. What is the futures price per unit above which there will be a margin call?

A $150

million interest rate swap has a remaining life of 9 months. Under the terms of

the swap, six-month SOFR is exchanged for 5% per annum (compounded

semi-annually).

The basis is defined as spot minus futures. A trader is hedging the sale of an asset with a short futures position. The basis increases unexpectedly. Which of the following is true?

An investor sells a futures contract on an asset when the futures price is $2,000. Each contract is on 500 units of the asset. The contract is closed out when the futures price is $2,005. Which of the following is true

What should a trader do when

the one-year forward price of an asset is too low? Assume that the asset

provides no income.