E. Financial Futures Relationship with Interest Rates

• Example: Assume you buy a December contract at 67-17 and interest rates increase, thus resulting in a lower contract price, say down to 60-00.

  • Loss = 7 17/32% * $100,000 = - $7,531.25If you sold the contract originally, (short) you would have experienced a gain if interest rates increased.

• Assume the same situation, then the short gain is:

7 17/32% * $100,000 = +$7,531.25

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