1.Hog futures are trading at 26 per contract. July 25 calls are trading at a pre

Question

1.Hog futures are trading at 26 per contract. July 25 calls are trading at a premium of $2. The call option on the Hog futures is said to be in the money or out of the money

2. If the December futures contract sells at a premium to the March futures contract on the same commodity the following year, and the spreader believes the price difference will narrow, he would

3. In terms of spot and futures contracts and the effective price (reduces or increases), a Weakening of the basis means what to a short hedger?

Explanation / Answer

Ans 1 Price=26 right to buy @ 25 premium paid=2 This is an in situation since the share may be purchased in $25 instead of $ 26 from the market However loss shall be=26-25-2 1 Ans2 If the case is of sell then situation shall be out since the share can be sale in market at $26 so loss shall be of premium paid ie$2

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