Go to The Wall Street Journal and select “Markets”, then “Futures” (over on the

Question

Go to The Wall Street Journal and select “Markets”, then “Futures” (over on the right side of the screen). Select one of the Futures and do the following:

a. Select a futures contract and note the price today.

b. Find the price of the futures contract one year ago today.

c. If you had invested $1000 into that futures contract one year ago, how much would you have gained or lost?

d. Speculate what you think will happen to that futures contract one year from now.

e. Provide an explanation supporting your findings.

Explanation / Answer

Answer:

a. We select Crude Oil - Electronic (NYMEX) Sep 2015 Future.

·         Today’s (2:29 PM 8/20/15) Price is $40.94

b. One year ago (52 weeks) Price was $92.26.

c. If we had invested $1000 into that futures contract one year ago, then we have lost = 1000 * (92.26-40.94) / 92.26 = $556.25

d. As per the past trend the value of future shall go down by 55.63%

Hence the expected value after one year should be = 40.94 * (1-0.5563) = $18.17

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