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SPREADING
NURUL AZWIN BINTI YUSOFF (2021480434)
NURDAMIA BATRISYIA BT KHAIRUDIN
(2021898316)
NURUL HAZIRAH BT SAMARI (2021585522
NURUL IZZATI BT ZAHAIRUL ANUAR
(2021480674)
NAJWA BINTI ROZUDDIN (2022981815)

JBA2425A
QUESTION: JUNE 2013 1(B)
MR. FERRY WORKS AT THE DERIVATIVES UNIT OF A FOREIGN BANK. HE
OBSERVES THE FCPO MARKET AND EXPECTS THE MARKET TO BE BULLISH
DUE TO INCREASING DEMAND FOR THE COMMODITY FROM THE INDUSTRY.
PRESENTLY IN EARLY MARCH, THE FCPO IS TRADED AT RM2250, RM2275,
RM2300 AND RM2325 FOR MARCH, APRIL, MAY AND JUNE FCPO CONTRACTS
RESPECTIVELY. HE DECIDES TO TRADE 5 LOTS EACH AND SPREAD THE RISK
BETWEEN APRIL AND JUNE CONTRACTS. BASED ON THE TREND, THE SPREAD
BETWEEN BOTH CONTRACTS WILL BE WIDENING AND HE HAS TO TAKE THIS
INTO CONSIDERATION FOR THE TRADING DECISION. THE FOLLOWING
MONTH, FCPO CLOSES AT RM2300, RM2400, AND RM2450 FOR APRIL TO
JULY CONTRACTS RESPECTIVELY. THE COMMISION IS RM50 PER LOT.
 JUSTIFY WHETHER TO BUY OR SELL BETWEEN THE
NEARBY AND DISTANT CONTRACTS IN EARLY MARCH.

2275 2325
To

2300
2450
Tm

Strategy Today : June FCPO, Buy @ High Price and April

FCPO , sell @ low price
 DETERMINE THE RESULTING NET
PROFIT FROM THE TRADE

March Sell 5 April FCPO Buy 5 June FCPO

(Today)) @ RM2,275 @RM2325

June Buy 5 April FCPO Sell 5 June FCPO

(Later) @ RM2300 @ RM2450

Profit/Loss Loss = (2275-2300) x RM25 x 5 Profit = (2450 - 2325) x RM25 x 5

= (RM3125) = RM15625

NSP = (RM15625-RM3125) - (RM50 X 2)

Net Spread = RM12400
Profit
 THANK
YOU VERY
MUCH!