Speculation with currencyfuturethe March 2013 Mexican peso futures contracthas a price of $ $0.09550. You believe thespot price in March will be 0.11000. Whatspeculative position would you enter into toattempt to profit from your beliefs? Calculateyour anticipated profits assuming you take aposition in three contracts
Speculation with currency future ❖the March 2013 Mexican peso futures contract has a price of $ $0.09550. You believe the spot price in March will be 0.11000. What speculative position would you enter into to attempt to profit from your beliefs? Calculate your anticipated profits assuming you take a position in three contracts
Solution: If you expect the Mexican peso torise from $0.09550 to $0.11000, you wouldtake a long position in futures since the futuresprice of $0.09550 is less than your expectedspot priceYour anticipated profit from a long position inthree contracts is: 3 x ($0.11000 - $0.09550) xMP500.000= $21.750.00. where MP500.000is the contractual size of one MP contract(p170)
❖Solution: If you expect the Mexican peso to rise from $0.09550 to $0.11000, you would take a long position in futures since the futures price of $0.09550 is less than your expected spot price. ❖Your anticipated profit from a long position in three contracts is: 3 x ($0.11000 - $0.09550) x MP500,000 = $21,750.00, where MP500,000 is the contractual size of one MP contract (p170). ❖