Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Tick Size and tick value
- This topic has 5 replies, 4 voices, and was last updated 4 years ago by John Moffat.
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- November 2, 2015 at 11:55 pm #280153
Dear Sir,
I am practicing questions and came across one that have me stumped (Dec 2011 Question 2).
Specifically what do I do with tick size and tick values. I am at a total lost and hope you can explain.
Regards
November 3, 2015 at 7:05 am #280172Although I explain ticks in the free lecture, you have never actually needed to use ticks (and I never bother).
One tick is a movement of 0.01 in the futures price. The profit or loss for 1 tick movement of 1 contract is calculated in the normal way and is 0.01 x $1M (contract size) / 400 = $25.To calculate the profit or loss in this example, you can show it in either of two ways. In the first bit of part (b) – using futures if interest rates increase by 0.5% to 3.8%.
The expected futures price is 96.02 (I assume you are happy calculating this).Therefore the gain on the futures = (96.16 – 96.02) x 37 (contracts) x $1M (contract size) / 400 (because they are 3 months futures) = $12,950.
Alternatively, if you want to use ticks. The change in the futures price is 96.16 – 96.02 = 0.14 which is 14 ticks.
The gain is therefore 14 ticks x 37 (contracts) x $25 (tick value) = $12,950It does not matter which way you do it (although it is important to understand the first way whether you do it that way or not, because you could be asked about it).
May 30, 2017 at 3:22 pm #389037“The change in the futures price is 96.16 – 96.02 = 0.14” which is 14 ticks.
May I ask why the price changes 0.14 representing 14 ticks?May 30, 2017 at 5:31 pm #389071Because 1 tick is the smallest movement there can be, which is 0.01.
(You never actually need to use ticks in the exam, but they are explained in full in my free lectures).
May 2, 2020 at 5:46 am #569749nice !!
May 2, 2020 at 10:17 am #569764🙂
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