This workout asks us to calculate the gain or loss that has been made from a futures trade, where the futures contracts that have been traded are S&P 500 Index futures. The question tells us that the futures price at the inception of these trades was 2,426 index points, and we're also told that the dollar value of one index point is 250. What this means is, for every one index point movement in the futures price, there will be a gain or loss suffered to the two counterparties to the futures trade of $250. We're also told that this particular trader had a long position for the initial trades that they did, and that they traded seven futures contracts. At the closeout of this trade, when this particular trader would've had to sell or be short of seven futures contracts, with the same underlying asset, and the same delivery date, the futures price was 2,500 index points or 2,500 index points. In terms of calculating the gain or the loss that this trader has suffered, the futures price has increased from the initial trade to the subsequent closeout trade. The initial trade was for 2,462 points and the futures price went up to 2,500 by closeout making for this particular trader, a 72 index point gain per contract traded.

Index points cannot be paid and received, so what we need to do is to translate this number of index points into a cash amount, and we do that by taking the number of index points that this trader has made and multiplying it by the dollar value of one index point, here being $250. We also need to remember within our calculation of the overall gain or loss, the number of contracts that has been traded, which in this example is seven.

Taking all of those points into account, this will give the trader an overall gain for these trades of $129,500.