Hamish Is a Day Trader Who Forms the Opinion That

question 15

Essay

Hamish is a day trader who forms the opinion that JB Hi Fi will fall from its current price of $18.50 to $18.He has $5000 to risk.The initial margin payment is 10%, ignoring brokerage costs.(a)What CFD order should Hamish place and what exposure does this achieve?
(b)Later that day, JB Hi Fi shares are trading at $18.Explain how Hamish can close-out his position and the profit or loss achieved.(c)Say instead the price increased to $19.Again explain how Hamish can close-out his position and the profit or loss achieved.

---

Definitions:

Substituted

The act of replacing one good or service with another due to changes in price, preference, or other variables.

Derived Demand

Demand for a factor of production or intermediate good that occurs as a result of the demand for another related good or service.

Productive

Refers to the efficiency and capability of producing goods and services, often measured by output per unit of input.

MRP Schedule

Refers to the schedule showing the relationship between the marginal revenue product (MRP) of labor or another input and the amount of the input employed, underpinning decisions in factor markets.