KIC000063 - Payoffs from Forwards & Futures Payoff...

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Payoff Payoff- Sr - F o o Long Position F, Payoffs So when you short a futures contract, your payoff is higher the lower the future price is. A Zero-Sum Game Y ou may have noticed that what the long position wins is exactly what the short position loses and vice versa. (ST-Fo)+(Fo-ST)~O • This is. :ztva-sm ~. Payoffs Suppose that you agree to sell an ounce of gold in three months for $300. If the ending gold price is $250 ].. You a~ of gold that is worth $250 for $300. You f:I;) . If the ending gold price is $300 j;. You sell an ounce of gold that is worth $300 for $300. You i;;r"'a~,"'(.ffl. If the ending gold price is $350 ,. You sell an 0UQce of gold that is worth $350 for $300. You Ira 50 . Payoff 0 ~ Payoff-s F, - ST '~ ST Short Position A Zero-Sum Game Payoff /~,.- 0 ~ Peyoffe s,- F, v,~,.~ ST Payoff= F 0 - s,. " 98
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KIC000063 - Payoffs from Forwards & Futures Payoff...

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