# Cotton Futures

Essay by PaperNerd ContributorUniversity, Master's November 2001

Executive Summary Portfolio Bought a Portfolio 1000 of Cotton Futures On Nov 8th 2001 at \$32.15 Primary Asset Value is (1000 X \$32.15) = \$ 32,150.00 Primary Asset Cost to me (Primary Asset Value X Margin Cost (6%)) = \$1929.00 Sold 1000 of Cotton Futures on Nov 16th 2001 at \$ 34.71 Primary Asset Value is (1000 X \$34.71) = \$ 34,710.00 Primary Asset Cost to me (Primary Asset Value X Margin Cost (6%)) = \$2082.60 Bought CRC Futures 1000 on Nov 8th 2001 at 187.61 Primary Hedge Value (1000 X \$ 187.61) = \$ 187,610.00 Primary Hedge Asset Cost (\$187,610.00 X 6%) = \$11,256.60 Sold CRC Futures 1000 on Nov 9th 2001 at 189.03 Primary Hedge Value is (1000 X \$ 189.03) = \$ 189,030.00 Primary Hedge Cost (\$189,030.00 x 6%) = \$ 11,341.80 Entry and Exit Points on Primary Asset Market Entry Point on Nov 8th 2001 : 3215 Profit Exit Point : 3415 Loss Exit Point : 3015 Profit Analysis on Primary Asset Profit from Asset = Primary Asset Value at Sold - Primary Asset Value at Cost \$34,710 - \$32,150 Profit from Primary Asset = \$2560.00

Primary Asset Holding Period Return Hold Period Return = Primary Asset Profit X (360 days / No. of holdingdays) ------------------------ Primary Asset Cost Hold Period Return = 9555.20 % Hedging Analysis For Hedging purpose we will use CRC Futures as it includes Soybean futures Hedge Asset Holding Period ReturnHolding Period Return = (189,030.00- 187,610.00)/ 11256.60 x (360/1) Holding Period Return = 4541.3357% Total Portfolio Holding Period Return: Total Portfolio Profit \$ 2560.00 ---------------------------- --------------= Total Portfolio HPR 1398.24% Total Portfolio Cost \$13,185.60 Cotton Futures: Cotton Futures are being traded for last couple of years because of the scarcity of cotton due to high demand of cotton for textile...