• Assessment Task

This is an individual task. In this assessment, students are required to use theTrading Simulator tool from CME Groupto trade on future products to hedge risk and/or take advantage of speculation. In the #1 trading session, will focus on Energy Future products.

The goal of this individual assignment is to gain a better understanding of the future market and risk management process, by testing and refining the trading strategies.

• Trading is to primarily hedge the risk exposure to the oil price. For student whose student number end with odd number, assume you are treasurers at airline company, and you are going to buy 12,000 barrels of jet fuel oil in 3 months.
• The aim to use Energy future products to hedge the price risk. Record the fuel price when they start to take positions on CME, to: 1) provide a background info about/justify how many contracts you go long/short, 2) show whether if succeed in hedging risk.
• There is $100,000 USD cash on hand at the beginning of trading. Must use at minimum 60% of account balance to hedge the oil price risk. Meanwhile, its allowed to have up to 40% of the account balance to speculating/arbitraging, and the speculation/arbitrage products are not limited to Energy futures (e.g., other future products, can even use Crypto futures to earn short-term profit, but also mind the potential loss).
• it can take both long and short positions in the future contracts. the orders might be rejected by the system because of margin shortage or market close. When the account balance drops to near zero, basically out of the game.
• Please use the excel template to record the trading and balance on a daily basis, or whenever make a trade.

Calibri (Body) 11 AA E B Wrap Text v General Conditional Format Paste B I U HERE Merge & Center v 19 Cell Formatting as Table Styles K29 D M This is an example template to illustrate the balance of your Physical assesst account, Hedging purpose account and Speculating purpose account. And it is a basic starting point to consolidate your net gain/loss from your trading activities. Please note, totally feel free to customize the template to suit your usage and add information/record you would like to add, to facilitate your analysis. This should be the date you start your trading (this will be the cost to a company) 8 Demand: 12,000 barrels of jet fuel oil in 3 months 9 Date Jet fuel oil price Total costs 10 2023/3/27 $ 110.00 $ 1,320,000.00 if purchased on 27 March 2023 11 2022/4/21 if purchased on 21April 2023 This should be the date you stop your trading 12 Cost difference LS 1,320,000.00 13 14 15. If the jet fuel oil price increases, more spending on purchasing it, otherwise, less spending 16 If you prefer to note down the daily change, feel free to do so. 17 Do remember, that is the "cost" you will spend, but not spend yet, "Paper Cost". 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43M You have $100,000 to trade on futures market, and a minimum 60% ($60,000 as margin) needs to be used to hedge your jet fuel oil risk. You need to decide the direction of the position, i.e., long or short, and the number of contract you would like to trade. This template is just a simple example. Please tailor it to satisfy your needs. And in this simple demostration, there is only one trade of 6 contracts for the hedging purpose, while you can put multiple trades with different price and trade on different days. Trading record Trading directions you can choose Number of units in Delivery one contract (Contract Date Direction Contract Month Number of contracts Trading price Contract value Margin required Total % of your available cash size) Margin per contract long 2023/3/27 long WTI Crude Oil May 6 66.53 $ 399,180.00 $ 39,600.00 39.60% 1000 $ 6,600.00 short Cash left for speculation $ 60,400.00 Note: column K " Margin per contract", you need to check the product on your purchasing date. The value in this template is only for demonstration purpose Record each trading you made for hedging Balance record Accumulated Number of units in Margin account Unrealized one contract Daily Price change Daily contract value change Contract value balance profit/loss Contract size) Date Direction Contract Delivery M. Number of contracts End day price 390,000.00 $ 30,420.00 -$ 9,180.00 1000 2023/3/27 long WTi Crude Oil May 6 65 1.53 -$ 9,180.00 $ 378,000.00 $ 18,420.00 -$ 21,180.00 1000 2023/3/28 long WTi Crude Oil May 63 -2 -$ 12,000.00 70 42,000.00 $ 420,000.00 $ 60,420.00 $ 20,820.00 1000 2023/3/29 long WTi Crude Oil May 2023/3/30 long 2023/3/31 long 2023/4/1 long 2023/4/2 long 2023/4/3 long 2023/4/4 long 2023/4/5 long 2023/4/6 long 2023/4/7 long 2023/4/8 long 2023/4/9 long 2023/4/10 long 2023/4/11 long 2023/4/12 long 2023/4/13 long 2023/4/14 longG M N Q You have $100,000 to trade on futures market, and a maximum 40% ($40,000 as margin) can be used to do speculating tradings. You need to decide the direction of the position, i.e., long or short, and the product and the number of contract you would like to trade. This template is just a simple example. Please tailor it to satisfy your needs. You can put multiple trades with different price and trade on different days. In this template, the cash left to me for speculation on 27/03/2023 is $60,400 Trading record Trading directions you can choose Date Direction Contract Number of units in one contract Delivery M. Number of contracts Trading price Contract value 2023/3/28 long Gold Margin required (Contract size) April Margin per contract 1993.7 $ 398,740.00 $ long 6,280.00 10 2023/3/30 short Micro E-Mini S&P 500 100 $ June 8,140.00 4511.75 $ short 22,558.75 $ 1,160.00 5 5 1,160.00 Note: column J " Margin per contract", you need to check the product on your purchasing date. The value in this template is only for demonstration purpose Record each trading you made for speculating Balance record for each contract Balance record for all speculating contracts Accumulated Unrealized Number of units in one Total Contract Total margin Total Accumulated 26 Date Direction Contract Delivery M. Number of contracts End day price Daily Price change Daily contract value change Contract value Margin account balance profit/loss contract (Contract size) value account balance Unrealized profit/loss 27 2023/3/28 long Gold April 1940 -53.7 -$ 10,740.00 $ 388,000.00 $ 5,540.00 -$ 10,740.00 10 2023/3/28 $ 388,000.00 $ 5,540.00 -$ 10,740.00 28 2023/3/30 long Gold April 2010 70 S 14,000.00 $ 402,000.00 $ 19,540.00 $ 3,260.00 100 29 short Micro E-Mini $&P 500 June 4520 8.25 - 41.25 5 22,517.50 $ 1,118.75 -$ 41.25 2023/3/30 $ 424,517.50 $ 20,658.75 $ 3,218.75 30 2023/3/31 31 2023/4/1 2023/4/2 2023/4/3 2023/4/4 35 2023/4/5 36 2023/4/6 37 2023/4/7 38 2023/4/8 39 2023/4/9 40 2023/4/10 41 2023/4/11 2023/4/12 2023/4/13 2023/4/14 2023/4/15 2023/4/16 2023/4/17 2023/4/18 2023/4/19 2023/4/20 2023/4/21 Record your speculating account balance each day between your first trading day and last trading day Physical assets position Hedging purpose position Speculating purpose position +