Commodities Futures
On 1 January the spot price of cocoa beans is P2,000 per tonne. You will need to
buy a tonne of cocoa beans to fulfil a customer order, which will be placed at some
point during March, and are concerned about the price going up .
There is an active market for cocoa futures, and you buy a three-month contract for
one tonne at P2,100. It expires on 31 March, so you are committed to buying one
tonne on that date at the futures price of P2,100.
However, you do not plan to take delivery of these cocoa beans, you plan to close
your position by selling a contract for one tonne when your customer places their
order.
Your customer places their order on 10 March.
Requirement:
Calculate your outcome if both the spot price and the March futures price per tonne
of cocoa beans on 10 March is.
a) P2,200
b) P1,800