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Financial Risk Manager Part 1

Financial Risk Manager Part 1

Explanation:

The cumulative net change in open interest is an increase of 250 contracts.

Step-by-step

  1. Trade 1: New long vs. new short → open interest +300
  2. Trade 2: New long vs. new short → open interest +250
    • Running total: 550
  3. Trade 3: Existing long is offset by a new long → one side closes, one side opens → open interest no change
  4. Trade 4: Existing long is offset by a new long → open interest no change
    • Running total: 550
  5. Trade 5: Existing long offsets existing short → both positions are closed → open interest −150
    • Running total: 400
  6. Trade 6: Remaining short position is delivered and settled against the corresponding long → open interest −150
    • Final total: 250

Conclusion

Starting from zero, the cumulative net change in open interest is +250 contracts.

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Question 708.1. The following six trades occur during a futures trading session among participants Albert, Barbara, Chris, Donald, Erin, and Fred:

  • Trader Albert (A) enters a new long position buying 300 futures contracts from Trader Barbara (B), who is the corresponding seller entering a new short position
  • Trader Chris (C) enters a new long position buying 250 futures contracts from Trader Donald (D), who is the corresponding seller entering a new short position
  • Trader Albert (A) offsets all 300 of his existing long contracts by selling to Trader Erin (E), who is the corresponding buyer entering a new long position
  • Trader Chris (C) offsets 125 of her existing contracts by selling to Trader Fred (F), who is the corresponding buyer entering a new long position
  • Trader Erin (E) offsets 150 of her existing long contracts by selling to Trader Barbara (B), who is the corresponding buyer who offsets 150 of her existing short contracts
  • Trader Barbara (B) forgets to offset and is forced to deliver on her short position in her remaining 150 contracts; she delivers to Trader Erin (E) according to her existing long contracts

Which of the following is the cumulative impact of these trades on the open interest; i.e., what is the cumulative net change to the open interest due to these six trades?

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MManit
Last updated: April 18, 2026 at 11:32
0

    A

    No change to open interest

    37.5%

    B

    Increase of 250 contracts

    62.5%
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