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I am confused about the Daikon b) part
Can you explain about the futures and how the settlement prices calculation is done.
when we borrow we sell futures and buy later, so we sell for 95.84 and buy for less 95.76 should be profit right?please can you explain.
Note (i) of the question says that on 1June they bought futures contracts at 95.84 (‘Further issues’ are not directly related to the earlier part of the question.)
As per note (ii) of the question, they will have had to pay the deposit (the margin) to the broker and day by day as the price of the futures changes they will have to increase the deposit or will be repaid some of the deposit.
On 2 June the price falls to 95.76, and since the had bought futures, they are making a ‘loss’ and therefore will have to increase the deposit by the amount of the difference.
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