solution needed…please show the calculation The following information relates to a futures market contract: Initial futures price on Day 0 $100 Initial margin requirement $5 Maintenance margin requirement $3 Settlement price on Day 1 $103 Settlement price on Day 2 $96 Settlement price on Day 3 $98 If no funds are withdrawn and margin calls are met at the beginning of the next day, the ending balance on Day 3 for an investor with a short position of 10 contracts is closest to: A. $50. B. $70. C. $80. D. $100.
shahravi123 Wrote: ------------------------------------------------------- > solution needed…please show the calculation > > The following information relates to a futures > market contract: > Initial futures price on Day 0 $100 > Initial margin requirement $5 > Maintenance margin requirement $3 > Settlement price on Day 1 $103 > Settlement price on Day 2 $96 > Settlement price on Day 3 $98 > If no funds are withdrawn and margin calls are met > at the beginning of the next day, the ending > balance on Day 3 for an investor with a short > position of 10 contracts is closest to: > A. $50. > B. $70. > C. $80. > D. $100. best thing to do with these is draw a table and work your way across and down – will give it 90 secs, here i go
The answer is B, $70. On day 2 when settlement price is 96, balance in margin account is only 1 per contract (5 + 96 - 100). Since this is below the maintenance margin requirement of 3, beginning of day 3, you add variation margin of 4 to bring the account balance up to 5. On day 3, settlement price increases to 98 (+2) so at the end of the day, the marging balance per contract is 5 + 2 + 7. 7 X 10 (# of contracts) = $70
Type in last sentence …On day 3, settlement price increases to 98 (+2) so at the end of the day, the marging balance per contract is 5 + 2 = 7. 7 X 10 (# of contracts) = $70
based on solution corect answer is D
on Day 3 $98 > If no funds are withdrawn and margin calls are met > at the beginning of the next day, the ending > balance on Day 3 for an investor with a short > position of 10 contracts is closest to: > A. $50. > B. $70. > C. $80. > D. $100. D dude, is it right, i know, i have a system basically, a futures acct changes every day to adjust for difference in closing prices. since this GUY IS SHORT, an upmove hits him with a l oss 4 steps i do for futures probs 1. is the dude long or short? 2. what is initial deposit (contracts * IM), i think it is 50 here 3. trigger price is IM - MM, in this case, 5- 2 = 3 and 3 * 10 = 30, so if acct dips under 30 he has to deposit whatever brings that shi% to 50. 4. work the table, work it acorss and down, it is a pain BUT THERE ARE NO SHORTCUTS,
He does not have to bring the account back to initial margin if it goes below MM…as far as I know…
da0618 Wrote: ------------------------------------------------------- > He does not have to bring the account back to > initial margin if it goes below MM…as far as I > know… you are wrong. see volume 6
thanks got 100 “D” 50-30=20 so 20+30 = 50 (back to IM) 50+70 = 120 - no margin required 120-20 = 1000 balance on 3rd day…
So if you get a margin call on futures, you must post margin so you get back to the initial margin requirement on the price on D0? IE, on day 1, he must post $30 to get back to $50 initial margin ($20 equity + $30 margin post), even though maintainance margin would be .03 * $103 = $3.09?
With futures, you must go back to IM when you hit MM I agree the first thing to do is figure out long or short. I ignore the number of contracts. Day 0 - Balance is the IM, $5 Day 1 - Stock went up $3, your balance falls to 2, so must get back to IM (+$3), $5 Day 2 - Stock down 7, balance is now 12 Day 3 - Stock up 2, balance is now 10 $10 x’s number of contracts = 100 Just think of it as realizing your gains/losses daily, and remember that you have to get back to IM when you go below MM