NISM Certifications · NISM-Series-XV: Research Analyst · Fundamental Analysis of Commodities
A jeweller holds 10 kg of physical gold bought at Rs 6,000 per gram and sells gold futures covering the same quantity at Rs 6,300 per gram, to be delivered in 3 months. Holding costs (interest, insurance) over the period are Rs 120 per gram. If the position is held to delivery, what is the locked-in profit?
The locked-in profit is Rs 18,00,000. The futures price exceeds the purchase cost by Rs 300 per gram, holding costs take away Rs 120, leaving Rs 180 per gram, and 10 kg equals 10,000 grams, giving Rs 18,00,000.
- ARs 1,80,000
- BRs 18,00,000Correct
- CRs 30,00,000
- DRs 1,80,00,000
Explanation
Gross gain per gram = 6,300 - 6,000 = Rs 300. Net of holding costs Rs 120 gives Rs 180 per gram. Quantity is 10 kg = 10,000 grams, so profit = 180 x 10,000 = Rs 18,00,000. Rs 30,00,000 ignores holding costs.
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