The March 2000 Mexican peso futures contract holds a price of $0.11695. You believe the march spot price will be $0.08500. In which speculative location would you enter to try to earn profit from your beliefs? Illustrates your anticipated profits letting you take a position in three contracts. Estimate size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price & this price materializes?
If you suppose the Mexican peso to depreciate from $0.09550 to $0.08500, you would take a short position in futures as the futures price of $0. 09550 is greater than your expected spot price.
Your anticipated profit from a short position in three contracts will be: 3 x ($0.09550 - $0.08500) x MP500,000 = $15,750.00.
If the futures price is an unbiased predictor of the future spot price & this price materializes, you will not profit or lose through your long futures position.