On November 15, 2019, Mary believes that the share market will suffer a correction (fall) of 20% in late February.  It is November 15, 2019 and the ASX 200 index stands at 6780.  If Mary commonly speculates using 5 SPI 200 contracts;

i)    Outline the position she should take to profit from her expectations.

ii)   Calculate her profit or loss on February 28^th, 2012 for this position if the bid and ask quotations for March 2020 SPI 200 contracts are quoted at 6582.0 and 6584.0 respectively.

iii)  Outline the action she should take to realise this profit or loss.

Use the quotations from the ASX table above, while assuming that all futures trades are conducted using market orders, and document her various actions in the table below. Recall that SPI futures are valued at $25 times the index.

 

Date	Futures Market	Physical Market
15 Nov 2019
28 Feb 2020
March 2020

   

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Category Interest Rate Markets 90 Day Bank Bills (IR) Futures Prices are DELAYED by a minimum of 20 minutes. Expiry Bid Dec 19 Mar 20 Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 Sep 21 Dec 21 Mar 22 Jun 22 Sep 22 Dec 22 Mar 23 Jun 23 Sep 23 Dec 23 Mar 24 99.0400 99.1800 99.2200 99.2500 99.2200 99.2300 99.2200 99.1900 99.1500 99.1300 99.1100 99.0800 99.0400 99.0100 98.9800 98.9500 Ask 99.0600 99.1900 99.2300 99.2600 99.2300 99.2400 99.2300 99.2100 99.1800 99.1700 99.1500 99.1100 99.0800 99.0500 99.0200 Security 90 Day Bank Bills (IR) 98.9900 Open 99,2200 High 99.2200 Low Type ✓ Futures 99,2200 Month - Last Trade 99.0500 99.1800 99.2200 99.2500 99.2200 99.2400 99.2400 99.2000 99.1700 99.1600 99.0900 99.0300 99.0100 99.0800 Last Trade Time 14/11/19 21:05 15/11/19 17:45 15/11/19 17:10 15/11/19 17:45 15/11/19 17:45 15/11/19 17:09 14/11/19 21:02 15/11/19 17:42 14/11/19 17:23 14/11/19 14:32 02/11/19 02:28 13/11/19 22:23 15/11/19 17:30 15/10/19 14:10 Change -0.01 Traded Volume 106 1 Last loaded: Fri 15 Nov 2019 17:50 Previous Settlement 99.0500 99.1900 99.2300 99.2600 99.2300 99.2500 99.2300 99.2100 99.1700 99.1700 99.1400 99.1000 99.0600 99.0200 98.9900 98.9900 98.9900 98.9900 Refresh Category Interest Rate Markets 90 Day Bank Bills (IR) Futures Prices are DELAYED by a minimum of 20 minutes. Expiry Bid Dec 19 Mar 20 Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 Sep 21 Dec 21 Mar 22 Jun 22 Sep 22 Dec 22 Mar 23 Jun 23 Sep 23 Dec 23 Mar 24 99.0400 99.1800 99.2200 99.2500 99.2200 99.2300 99.2200 99.1900 99.1500 99.1300 99.1100 99.0800 99.0400 99.0100 98.9800 98.9500 Ask 99.0600 99.1900 99.2300 99.2600 99.2300 99.2400 99.2300 99.2100 99.1800 99.1700 99.1500 99.1100 99.0800 99.0500 99.0200 Security 90 Day Bank Bills (IR) 98.9900 Open 99,2200 High 99.2200 Low Type ✓ Futures 99,2200 Month - Last Trade 99.0500 99.1800 99.2200 99.2500 99.2200 99.2400 99.2400 99.2000 99.1700 99.1600 99.0900 99.0300 99.0100 99.0800 Last Trade Time 14/11/19 21:05 15/11/19 17:45 15/11/19 17:10 15/11/19 17:45 15/11/19 17:45 15/11/19 17:09 14/11/19 21:02 15/11/19 17:42 14/11/19 17:23 14/11/19 14:32 02/11/19 02:28 13/11/19 22:23 15/11/19 17:30 15/10/19 14:10 Change -0.01 Traded Volume 106 1 Last loaded: Fri 15 Nov 2019 17:50 Previous Settlement 99.0500 99.1900 99.2300 99.2600 99.2300 99.2500 99.2300 99.2100 99.1700 99.1700 99.1400 99.1000 99.0600 99.0200 98.9900 98.9900 98.9900 98.9900 Refresh

Answer rating: 100% (QA)

Answer i To profit from her expectations Mary should take a short position on SPI 200 futures contra... View the full answer