(DISCLAIMER: First thing, this question is NOT from a CFA prep-provider and I am not even sure if this is covered in the L2 syllabus. You may SKIP this if you want. My apologies if this is not the right place to post the question and moderators are requested to remove the thread if need be.) Looks easy, but my answer did not match. A Trading member Manojbhai took proprietary positions in a November 2000 expiry contract. He bought 3000 trading units at 1210 and sold 2400 at 1220. The end-of-day settlement price for November 2000 expiry contract is 1220. If the initial margin per unit for the November 2000 contract is Rs 100 per unit, then the total initial margin payable by Manojbhai would be 1. Rs.60,000 2. Rs.30,000 3. Rs.3,00,000 4. Rs.5,40,000
- What happens afterwards is just red herring,
JDV Since he bought 3000 and Initial margin was 100 shouldn’t the answer be C == 300,000
Yes. (My 1) wasn’t an answer but a list that I abandoned)
No wrong The answer is 1. Rs.60,000 … JDV your *abandoned list* would’ve worked in the exam too.
60K is wrong. He bought 3000 contracts @ Initial Margin for 100 So 300,000 should be the answer.
This doesn’t sound like a properly stated question. It seems that they are calculating this as simply 3000 units bought minus 2400 units sold, leaving 600 units open, which requires 60,000 of margin. Of course he made a profit on the contracts sold, but that’s irrelevant. Also, when did he sell those 2400 contracts? That makes a difference when talking about initial margin.
@Dreary, This is precisely what I think too. They got the answer using (3000-2400)*100 which requires the margin. But that is not the margin payable. Guess this is just a poorly worded question. It has been taken from the core readings of a National Level Exam conducted by the NSE in India. Wonder how can they get sooo wrong!
okay another one, Have the exam in 11 hours. your responses are much appreciated. June futures contract on WIPRO closed at Rs. 1153 on May 20 and at Rs. 1150 on May 21, 2002. Raju has a short position of 4000 in the June futures contract. On May 21, 2002, he sells 3000 units of 10-June-2002 expiring Put Options on WIPRO at strike price of Rs.1145 for a premium of Rs.28 per unit. What is his net obligation to / from the Clearing Corporation for May 21, 2002? (a) Pay-in of Rs.32,000 (b) Pay-in of Rs.72,000 © Pay-out of Rs.96,000 (d) Pay-out of Rs.32,000
© his short made $3 x 4,000 contracts = 12k and if he wrote a put at 1145 and the px is 1150 then whammy good times, his put will expire worthless if let’s say may 21st is options expiration and he profits the 28 x 3,000 = 84k. 84 and 12 = 96k good luck on your test. are you studying for level 2 also this coming year or just like this forum for your homework? just curious.
bannisja Wrote: ------------------------------------------------------- > © his short made $3 x 4,000 contracts = 12k and > if he wrote a put at 1145 and the px is 1150 then > whammy good times, his put will expire worthless > if let’s say may 21st is options expiration and he > profits the 28 x 3,000 = 84k. 84 and 12 = 96k Thank you Bannisja, similar question appeared on the exam and I nailed it! And hell I cleared too. bannisja Wrote: ------------------------------------------------------- > good luck on your test. are you studying for > level 2 also this coming year or just like this > forum for your homework? just curious. I am taking L2 in June and have already received my books for the same. Also, though I hate to admit on a public forum, but must dispel the notion that B-Schoolers are given “homeworks”. At least where I study, we are mostly given cases to solve and projects to work on! Others on this forum may corroborate what I claim! As for why I like this forum, its because I get to read the conversations between (and interact with) people as qualified as yourself and JDV, learn from their experiences and opinions, stay updated with the latest in American/World markets and read about everyone’s experiences in their jobs/profiles. What more, these *silly/basic* doubts quite often bring various angles to solve the problem and become a repository at the time of revision. And the testimonial can go on longer. And yess, this forum is the reason why I cleared L1!!