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Sir could you please help me what is this unexpired basis 0.18 in this. And one thing more i listened to your lecture in which u mentioned to divide gain on future by 400 so why is it not done here could we just do (9616-9602)/400 ×37. Thanks
The basis falls linearly to zero over the life of the future, the unexpired basis is the basis at the start of the loan.
Yes you could of course do what you have written – it will give exactly the same answer!
Thank you sir.It means we can totally ignore ticksize.And why are they multiplhing total basis by 2/6 to get unexpired basis.
In the same question while using collar whats the reason that we buy june put at 96 for 0.163 cannt we do other way i mean buy june put 96.50 at .581 and sell the other. And one thing i get sometime muddle up when to exercise or not so please make all these clear thank by you so much sir.The loan starts in 4 months time.
June contracts expire at the end of June, which is in 6 months time.So the futures deal will end when there is 2 months left. So the basis will have fallen to 2/6 of the current basis.
Buying a put at 96 is limiting the maximum interest to (in a perfect world) 4%.
Selling a call at 96.50 is limiting the minimum interest to (in a perfect world) 3.5%.That is a collar. It would make no sense the other way round.
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