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    PMT Home Assignment Pre Midsem 2024

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    imon.landage
    The document discusses an aluminum trader's options choices in January 2019 based on his assumptions about price movements in November 2018. It also covers terms related to commodity exchanges and trading, and provides an example of calculating profit/loss on a metal future where the market price is above or below the strike price at maturity.

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    PMT Home Assignment Pre Midsem 2024

    Uploaded by

    imon.landage
    10 views1 page
    The document discusses an aluminum trader's options choices in January 2019 based on his assumptions about price movements in November 2018. It also covers terms related to commodity exchanges and trading, and provides an example of calculating profit/loss on a metal future where the market price is above or below the strike price at maturity.

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    PMT Home Assignment Pre midsem 2024

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    The document discusses an aluminum trader's options choices in January 2019 based on his assumptions about price movements in November 2018. It also covers terms related to commodity exchanges and trading, and provides an example of calculating profit/loss on a metal future where the market price is above or below the strike price at maturity.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    10 views1 page

    PMT Home Assignment Pre Midsem 2024

    Uploaded by

    imon.landage
    The document discusses an aluminum trader's options choices in January 2019 based on his assumptions about price movements in November 2018. It also covers terms related to commodity exchanges and trading, and provides an example of calculating profit/loss on a metal future where the market price is above or below the strike price at maturity.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    PMT Home Assignment: Prepare for yourself, Submit on 13th Feb,2024

    1. An aluminum trader assumes in November,2018 that in January2019 aluminum price will


    have 60 % probability that it will be higher by 10% than in November,2018 and 40%
    probability that it will be lesser than 15% in November,2018. The November,2018 price of
    aluminum is $2000 per metric ton. He makes a 3-month Call and Put option choice for
    strikes in January ,2019. The call option commission/premium is $20.00 per ton and put
    option commission/premium is $ 30.00 per ton. The trader has $1000000.00 to take part in
    the trading and allocates his call and put option purchases in a ratio on the basis of
    probabilities at the January,2019 price of aluminum. He borrows the money from a lender
    who charges him 2% interest per month for the money lent. As the delivery will require sea
    transport he also has to buy advance insurance at a cost of $ 2.00 per option.

    The January aluminum price was $2050.00 per ton. Considering the options, he has,
    explain what will be the results of the choices he can make? Which option out of all
    options he has, will provide him profit on the investment he makes?

    2. Related to commodity exchanges explain the following:

    a. Who are the commodity and commodity derivatives traded in the exchanges?

    b. Explain different types of trading in LME.

    c. Related to the Exchange based trading explain the meaning of the terms:

    1. CIF. 2. FOB 3. Backwardation 4. Contango 5. Strike price

    3. A metal buyer buys a future on these terms: 800 ton, current market price : Rs
    20,000 per ton, and the premium/commission price: 2% of the total price ( non-
    refundable) and the strike price: Rs.20,000 per ton. On the maturity day , the market
    price of the metal is Rs.20,200.00 per ton. What the profit/loss he/she make on the
    maturity date.

    Now the buyer ,before purchase, asks for a revised future: 800 ton, current market
    price : Rs 20,000 per ton, and the premium/commission price: 4% of the total price (
    adjustable to the price at maturity) and the strike price: Rs.20,500 per ton. On the
    maturity day , the market price of the metal is Rs.20,200.00 per ton. What the
    profit/loss he/she make on the maturity date under the revised future ?

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