spot price was given, it was S=112

Arbitrage using Futures GO to CME.com for futures information. Live Cattle Futures Contract One contract =40,000 pounds Price unit: Cents per pound Oct 2019 contract F=113.125 Number of Months =11 T=11/12=.9167 r=5% S=112 (google "live cattle spot price") Quote page from CME.com, November 15,2018 Future-spot Parity: F=Serr Test if there is an arbitrage opportunity F=Ser Left F=113.125 Right =SST=112e059167=117.253 Ask if the left is equal to Right? The Right is not equal to the left. There is an arbitrage opportunity. Buy low and sell high Long futures, short spot, and lending money The arbitrage profit will be high minus low: 117.253-113.125=4.128 The following table is used to prove the arbitrage profit (Question: We derive the arbitrage profit of 4.128 per pound at t=1. How much is the profit in today's dollar? The profit in today's dollar=4.128* .559167=3.943 per pound) Trading credit needed for one pound (For simplicity, counting total dollar amount involved): Long Futures: 0 ShortSpot:Lendingmoney:Total:Creditsneededforonecontract$2.2440,000=$89,600112112224=$2.24 Given $1,000,000 credits, you may trade 11 ( 1000000/89600=11.16 ) contracts of live cattle. Profits: 4.128 cents per pound Total profits per contract $0.0412840,000=$1,651.20 Total profits for 11 contracts=11* $1,651.20=$18,163.2 Net Profits =$18163.211($25+$25+$25)=$17,338.2 Use futures and spot relationship to find an arbitrage opportunity. F=SerT We learned in the class that when future price is deviated from the price determined from the above formula, an arbitrage opportunity will arise. You will use this case to illustrate if you can find an arbitrage opportunity in a real world. You may define the parameters on your own or use the following assumption for the parameters: Interest rate is 5% Transaction costs for a trade on futures (selling or buying) is $25 per contract 365 days a year To find spot gold price, you may google "spot gold price" or use the most nearby month futures price as spot price. Your case report should include the following format: Introduction of the case study, explanation of any related theory, data sources (a screen shot of the Futures quote from CME.com), analytical results, and conclusion. Assume you have $1,000,000 trading credit to conduct the arbitrage. Finally, include everything, such as Excel calculation, in a word document. Arbitrage using Futures GO to CME.com for futures information. Live Cattle Futures Contract One contract =40,000 pounds Price unit: Cents per pound Oct 2019 contract F=113.125 Number of Months =11 T=11/12=.9167 r=5% S=112 (google "live cattle spot price") Quote page from CME.com, November 15,2018 Future-spot Parity: F=Serr Test if there is an arbitrage opportunity F=Ser Left F=113.125 Right =SST=112e059167=117.253 Ask if the left is equal to Right? The Right is not equal to the left. There is an arbitrage opportunity. Buy low and sell high Long futures, short spot, and lending money The arbitrage profit will be high minus low: 117.253-113.125=4.128 The following table is used to prove the arbitrage profit (Question: We derive the arbitrage profit of 4.128 per pound at t=1. How much is the profit in today's dollar? The profit in today's dollar=4.128* .559167=3.943 per pound) Trading credit needed for one pound (For simplicity, counting total dollar amount involved): Long Futures: 0 ShortSpot:Lendingmoney:Total:Creditsneededforonecontract$2.2440,000=$89,600112112224=$2.24 Given $1,000,000 credits, you may trade 11 ( 1000000/89600=11.16 ) contracts of live cattle. Profits: 4.128 cents per pound Total profits per contract $0.0412840,000=$1,651.20 Total profits for 11 contracts=11* $1,651.20=$18,163.2 Net Profits =$18163.211($25+$25+$25)=$17,338.2 Use futures and spot relationship to find an arbitrage opportunity. F=SerT We learned in the class that when future price is deviated from the price determined from the above formula, an arbitrage opportunity will arise. You will use this case to illustrate if you can find an arbitrage opportunity in a real world. You may define the parameters on your own or use the following assumption for the parameters: Interest rate is 5% Transaction costs for a trade on futures (selling or buying) is $25 per contract 365 days a year To find spot gold price, you may google "spot gold price" or use the most nearby month futures price as spot price. Your case report should include the following format: Introduction of the case study, explanation of any related theory, data sources (a screen shot of the Futures quote from CME.com), analytical results, and conclusion. Assume you have $1,000,000 trading credit to conduct the arbitrage. Finally, include everything, such as Excel calculation, in a word document