Find the full original copyable PDF textbook in the link

below:

Visit Full Copyable PDF

 58 CHAPTER 2

The asset underlying the futures contract, the contract size, and the way the price is
quoted are shown at the top of each section of Table 2.2. The first asset is gold. The
contract size is 100 ounces and the price is quoted as dollars per ounce. The maturity
month of the contract is indicated in the first column of the table.

Prices
The first three numbers in each row of Table 2.2 show the opening price, the highest
price in trading so far during the day, and the lowest price in trading so far during the
day. The opening price is representative of the prices at which contracts were trading
immediately after the start of trading on a day. For the June 2020 gold contract, the
opening price on May 21, 2020 was $1,751.7 per ounce. The highest price during the day
was also $1,751.7 per ounce and the lowest price during the day was $1,713.3 per ounce.

Settlement Price
The settlement price is the price used for calculating daily gains and losses and margin
requirements. It is usually calculated as the price at which the contract traded im­
mediately before the end of a day’s trading session. The fourth number in Table 2.2
shows the settlement price the previous day. The fifth number shows the most recent
trading price, and the sixth number shows the price change from the previous day’s
­settlement price. In the case of the June 2020 gold contract, the previous day’s
­settlement price was $1,752.1. The most recent trade was at $1,725.5, $26.6 lower than
the previous day’s settlement price. If $1,725.5 proved to be the settlement price on May
21, 2020, the margin account of a trader with a long position in one contract would lose
2,660 on May 21, 2020 and the margin account of a trader with a short position in one
contract would gain this amount on that date.

Trading Volume and Open Interest

The final column of Table 2.2 shows the trading volume. The trading volume is the
­number of contracts traded in a day. It can be contrasted with the open interest, which is
the number of contracts outstanding, that is, the number of long positions or, equiva-
lently, the number of short positions.
If there is a large amount of trading by day traders (i.e., traders who enter into a
position and close it out on the same day), the volume of trading in a day can be greater
than either the beginning-of-day or end-of-day open interest.

Patterns of Futures
Futures prices can show a number of different patterns. They can increase with the
maturity of the futures contract, decrease with the maturity of the futures contract, or
show a mixed pattern where the futures price sometimes increases and sometimes
decreases with maturity. A futures market where prices increase with maturity is known
as a normal market. A futures market where futures prices decrease with maturity is
known as an inverted market. Table 2.2 indicates that gold, crude oil, corn, and wheat
exhibited a normal market on May 21, 2020 for the range of maturities considered.
­Soyabeans and live cattle exhibit a mixture of the two patterns: normal for some
­maturity ranges and inverted for others.

M02_HULL0654_11_GE_C02.indd 58 30/04/2021 16:42

 Futures Markets and Central Counterparties 59

Table 2.2 Futures quotes for a selection of CME Group contracts on commodities
on May 21, 2020.
Open High Low Prior Last Change Volume
settlement trade
Gold 100 oz, $ per oz
June 2020 1751.7 1751.7 1715.3 1752.1 1725.5 -26.6 223,200
Aug. 2020 1765.3 1765.3 1731.2 1765.6 1740.7 -24.9 54,503
Oct. 2020 1768.0 1768.8 1739.0 1774.0 1747.4 -26.6 2,559
Dec. 2020 1778.8 1779.8 1743.8 1781.7 1752.7 -29.0 5,280
Dec. 2021 1779.0 1779.0 1755.1 1790.7 1757.2 -33.5 345
Crude Oil 1000 barrels, $ per barrel
July 2020 33.53 34.66 33.26 33.49 33.96 + 0.47 356,081
Aug. 2020 33.93 35.05 33.78 33.94 34.40 + 0.46 118,534
Dec. 2020 35.18 36.08 35.06 35.23 35.76 + 0.53 78,825
Dec. 2021 37.87 38.49 37.78 37.91 38.15 + 0.24 22,542
Dec. 2022 40.30 40.74 39.92 40.27 40.24 -0.03 3,732
Corn 5000 bushels, cents per bushel
July 2020 317.75 320.25 316.25 319.50 318.00 -1.50 104,099
Sept. 2020 323.50 325.00 321.25 324.25 323.00 -1.25 25,967
Dec. 2020 333.25 334.50 331.00 334.00 333.00 -1.00 32,855
Mar. 2021 346.00 347.00 344.00 346.50 345.75 -0.75 4,449
May 2021 353.75 354.50 351.50 354.00 353.50 -0.50 1,077
Dec. 2021 365.25 365.75 363.50 365.75 365.75 0.00 2,775
Soybeans 5000 bushels, cents per bushel
July 2020 835.00 848.50 833.75 846.75 835.25 -11.50 89,375
Sept. 2020 849.25 851.50 839.00 849.75 840.50 -9.25 5,502
Nov. 2020 851.50 856.00 844.00 854.00 846.25 -7.75 42,274
Jan. 2021 856.75 859.00 847.75 857.00 849.75 -7.25 9,173
Mar. 2021 850.25 852.75 843.00 850.25 844.75 -5.50 13,531
May 2021 846.50 851.00 842.50 848.25 844.25 -4.00 3,736
July 2021 855.50 858.25 850.50 855.75 852.25 -3.50 1,953
Wheat 5000 bushels, cents per bushel
July 2020 520.00 524.00 512.00 513.75 515.75 + 2.00 72,667
Sept. 2020 520.75 525.00 514.50 515.25 518.50 + 3.25 26,565
Dec. 2020 528.00 532.25 523.00 522.75 526.50 + 3.75 18,522
Mar. 2021 531.75 538.75 530.25 530.00 534.50 + 4.50 6,020
May 2021 535.50 540.25 532.75 532.75 537.00 + 4.25 1,333
Live Cattle 40,000 lbs, cents per lb
June 2020 98.775 99.200 97.975 98.400 98.650 + 0.250 6,567
Oct. 2020 99.800 99.975 98.775 99.625 99.800 + 0.175 6,875
Dec. 2020 102.750 102.950 102.050 102.725 102.800 + 0.075 5,511
June 2021 101.750 102.750 101.625 101.975 102.675 + 0.700 290

M02_HULL0654_11_GE_C02.indd 59 30/04/2021 16:42

Thank you for reading. To get the full copyable version:

CLICK HERE