We appreciate your visit to On August 12 2022 a speculator held the following Natural Gas calendar spread Long 20 000 futures for January 2023 delivery at a price of. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!
Answer :
The speculator is long 20,000 futures for January 2023 delivery, with a price of $13.30 per unit. And they are short 20,000 futures for November 2022 delivery, with a price of $9.30 per unit.
First, let's calculate the cash flow for the long position: Cash flow from long position = (Long position quantity) * (Price difference) Cash flow from long position = 20,000 * ($13.30 - $9.30) Cash flow from long position = 20,000 * $4
Cash flow from long position = $80,000 Next, let's calculate the cash flow for the short position: Cash flow from short position = (Short position quantity) * (Price difference) Cash flow from short position = 20,000 * ($9.30 - $13.30)
Cash flow from short position = 20,000 * (-$4) Cash flow from short position = -$80,000
Since the speculator closed the calendar spread on the same day, the total cash flow associated with closing this spread would be the sum of the cash flows from the long and short positions:
Total cash flow = Cash flow from long position + Cash flow from short position Total cash flow
= $80,000 + (-$80,000)
Total cash flow
= $0
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