Investments, tenth edition

Futures Contracts | 

WSJ.com/commodities

 Figure 22.1 

Futures listings  

Source:  The Wall Street Journal,  January 25, 2013. Reprinted by permission of  The Wall Street Journal,  © 2013 

Dow Jones & Company, Inc. All Rights Reserved Worldwide. 

bod61671_ch22_770-798.indd   773

bod61671_ch22_770-798.indd   773

7/27/13   1:48 AM

7/27/13   1:48 AM

Final PDF to printer

---

774

P A R T   V I

  Options, Futures, and Other Derivatives

  Figure 22.2 , panel B is a plot of the profits realized by an investor who enters the short 

side of a futures contract. It is the mirror image of the profit diagram for the long position.   

Payoff

Profit

C: Buy a Call Option

X

P

T

Profit

B: Short Futures Profit = F

0

 – P

T

F

0

P

T

Profit

A: Long Futures Profit = P

T

 – F

0

F

0

P

T

 Figure 22.2 

Profits to buyers and sellers of futures and options contracts 

     a.   Compare the profit diagram in  Figure 22.2 , panel B to the payoff diagram for a long position in a put 

option. Assume the exercise price of the option equals the initial futures price.  

    b.   Compare the profit diagram in  Figure 22.2 , panel B to the payoff diagram for an investor who writes a 

call option.   

 CONCEPT CHECK