On March 10, WSJ reported that Nickel Market Freeze Extended to Sort Out Big Trading Loss...
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On March 10, WSJ reported that "Nickel Market Freeze Extended to Sort Out Big Trading Loss Amid Ukraine War": "The article reported that "London's nickel market will stay closed at least until next week, giving the London Metal Exchange more time to resolve a crisis caused by a huge loss- making trade originating in China. The LME closed trading in nickel after a huge run-up in prices inflicted severe financial pressure on producers that had sold nickel forwards on the LME as a hedge. The biggest loser was Tsingshan Holding Group, the world's largest nickel producer, which had built up the biggest short position in the metal." Assume Gideon is a commodities trader at Goldman Sachs. On March 10, he had a long position in 100 Nickel Futures. The future contract promises the delivery of 200 tones of Nickel. The future price of Nickel per ton is $64,093.00. March 15 is the maturity date of these futures. Traders believe that if the market were open, the spot price for Nickels would be $100,000 per ton. Please answer the following questions. A. Estimate Gideon's paper loss/gain in this position on the maturity date. Show your work fully. (10 Points) B. Will this gain/loss be realized? Meaning, will Gideon actually lose or gain money on March 15? Explain your answer fully and support your answer with the relevant payoff diagram. (10 Points) C. Conversely, William, now working for Morgan Stanley, has a long position. Indeed, William is Gideon's counterparty in this transaction. What would be William's "realized" and "paper" losses/gains? (10 Points) On March 10, WSJ reported that "Nickel Market Freeze Extended to Sort Out Big Trading Loss Amid Ukraine War": "The article reported that "London's nickel market will stay closed at least until next week, giving the London Metal Exchange more time to resolve a crisis caused by a huge loss- making trade originating in China. The LME closed trading in nickel after a huge run-up in prices inflicted severe financial pressure on producers that had sold nickel forwards on the LME as a hedge. The biggest loser was Tsingshan Holding Group, the world's largest nickel producer, which had built up the biggest short position in the metal." Assume Gideon is a commodities trader at Goldman Sachs. On March 10, he had a long position in 100 Nickel Futures. The future contract promises the delivery of 200 tones of Nickel. The future price of Nickel per ton is $64,093.00. March 15 is the maturity date of these futures. Traders believe that if the market were open, the spot price for Nickels would be $100,000 per ton. Please answer the following questions. A. Estimate Gideon's paper loss/gain in this position on the maturity date. Show your work fully. (10 Points) B. Will this gain/loss be realized? Meaning, will Gideon actually lose or gain money on March 15? Explain your answer fully and support your answer with the relevant payoff diagram. (10 Points) C. Conversely, William, now working for Morgan Stanley, has a long position. Indeed, William is Gideon's counterparty in this transaction. What would be William's "realized" and "paper" losses/gains? (10 Points)
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A To estimate Gideons paper lossgain in this position on the maturity date we need to calculate the ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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