Answer:
The company total profit is $2,200
The realization of the $2,200 total profit will be on the day-to-day basis with the time frame as followed:
- $800 will be realized in the 2018 ( from September to end of the year);
- $1,400 will be realized in 2019 ( from the begining of 2019 to the time the position is closed.
(a) A Hedger will be taxed on his/her $2,200 profit on the year of 2019;
(b) A Speculator will be taxed on his/her $2,200 profit right it is realized. In other words, $800 of profit will be taxed in 2018 and 1,400 of profit will be taxed in 2019.
Explanation:
- The total profit is calculated as: ($50.50-$48.30) x 1,000 = $2,200;
- The profit realized in 2018 is calculated as ( $49.10-$48.30) x 1,000 =$800;
- The profit realized in 2019 is calculated as ( $50.50-$49.10) x 1,000 =$1,400.
