Explanation

To calculate the cost of unwinding the portfolio, we need to consider the bid-offer spread cost for each position:

For the short position ($10,000 with spread 0.030):

• When unwinding a short position, the investor needs to buy back the shares
• Cost = 0.5 × Position Value × Spread
• Cost = 0.5 × $10,000 × 0.030 = $150

For the long position ($17,000 with spread 0.040):

• When unwinding a long position, the investor needs to sell the shares
• Cost = 0.5 × Position Value × Spread
• Cost = 0.5 × $17,000 × 0.040 = $340

Total cost to unwind the portfolio:

• Total = $150 + $340 = $490

Therefore, the approximate cost to unwind this two-position portfolio is $490.00.

Key Concept: The cost of unwinding a position is calculated as half the bid-offer spread multiplied by the position value, as the investor typically pays half the spread when executing a trade.