Answer to Question #131329 in Finance for London Williams

Question

Suppose that a trader enters into a long futures position for 1000 oil barrels with a delivery date on December 2016 and a future price of $40 per barrel. Suppose that on delivery date, the spot price of oil is $45 per barrel. What is the payoff to the long position?

Answer 1

Spot price per barrel at maturity date $p_{1}=45$

Future price for each barrel $F_{0}=40$

Payoff of the future contract (long position) $=P_{1}-F_{0}=(45-40)\times1000$

$=5000$