Series 3 net profit/loss on crudes

Question

1.       A crude oil trader executes the following orders 

Bought 5 December crude oil at 78.20

Offset 5 December crude oil at 76.50

Each crude contact covers 1000 barrels of oil. If the traders commission merchant charges $42 per round turn contract what would the trader's net profit or loss be for executing the above orders? 

A. $1,700 gain

B. $1,700 loss

C. $8,710 loss

D. $8,900 loss

Answer 1

C) Loss of $8710

Trading Mantra: Buy Low Sell High OR Sell High Buy Low. Anything other than that you lose !!

Here,

Trader bought for 78.20 and sold the same for 76.50 : Duhh , bad trade of course :-(

Loss of $1.70/barrel on 5 contracts of 1000 barrels in each contract

Loss on position = -$1.70 X 5 X 1000 = -$8500

Round turn commission is one payment for both the Buy and Sell side:

So commission = $42 X 5 contracts = -$210 ( out of pocket or a loss )

All in Loss = -$8500 + -210 = -$8710