Question22 Mohamad shorted futures contracts on a US stock at $61.50 per share. Each contract is for the sale of 200 shares. The stock price at the end of the contract is $57. Mohamad has to pay a flat fee of $8000 as well as a trading commission of $7 per contract. If he has shorted 100 contracts, what is the net profit/loss to him? [4 marks] [input] Your response must be entered as a positive (profit)/negative (loss) numerical value with 0 decimal places and excluding the dollar sign ($) and any commas (,). Maximum marks: 4 Flag question undefined

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BlackTom AI · Accepted Answer

We need to determine Mohamad's net profit or loss from shorting futures contracts.
First, compute the gross profit from the price move: when short, profit per share equals the initial short price minus the final price. Here, 61.50 - 57.00 = 4.50 dollars per share.
Each contract represents 200 shares, so profit per contract is 4.50 × 200 = 900 dollars.
Mohamad shorted 100 contracts, so gross profit is 900 × 100 = 90,000 dollars.
Next, account for fees: a flat fee of 8,000 dollars plus a trading commission of 7 dollars per contract. With 100 contracts, commissions total 7 × 100 = 700 dollars. Total fees = 8,000 + 700 = 8,700 dollars.
Finally, net profit (loss) equals gross profit minus total fees: 90,000 − 8,700 = 81,300 dollars.
Thus, the net result is a positive 81,300. Note: the provided sample answer of 74,000 appears inconsistent with the fee structure and the calculated gains from the price move.

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