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Determine the profit or loss in both positions

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Reference no: EM132545346

Gracie's Grains has distributed a genetically modified grain that has been widely used by NSW wheat farmers. Gracie decides that before this evening's 'Four Corners' exposé goes to air detailing the link with Deranged Baker Disorder, she should take up a position to profit from the imminent detrimental impact the news will have on NSW wheat prices, and positive impact on WA wheat prices.

Question i) If she is prepared to trade in 50 close-dated contracts (of 20 metric tonnes / contract) in each of the NSW and WA wheat futures, outline a possible strategy.

Question ii) Determine her profit or loss in both positions if both NSW and WA wheat futures prices decrease by exactly 20% immediately following the programme going to air.

Reference no: EM132545346

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