. Adam, a speculator, is convinced that a share he has been analysing will fall significantly in the forthcoming months. The current stock price is 468p per share. He is investigating a strategy to exploit this potential drop: sell five futures contracts (each 1000 shares) with a 2-month expiry at a price 465.
Required: For the derivative
(a) What would the profit (loss) be if the share price rose to 490 in two months under the strategy?
(b) What would the profit (loss) be if the share price fell to 420 in two months under the strategy?
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