Assume a trader who has no existing CPO positions is bullish on CPO spot and futures pricing over the next three months. He feels CPO prices will rise, and he wants to benefit from his prediction. He points out that the 3-month CPO futures with a 90-day maturity are now trading at $980/ton.

1. What is the appropriate speculative strategy?

2. Calculate the profit/loss if the CPO price is $1,176.00 in 90 days (at futures maturity).

3. Calculate the profit/loss if the CPO price drops 20% to $784 in 90 days.