Suppose the future price is 1200 and you wish to acquire a $10 million position in the S&P 500 index.
a) Find the notional value of one contract (amount you are agreeing to pay at expiration per futures contract)
b) Suppose you go long $10 million of the index: How many futures contracts would you enter?
c) Suppose there is 20% margin, If the S&P 500 future drops by 10, how much do you lose on your futures position?
d) Over two weeks, the future price drops 100 points, on a market-to-market basis, how much have you lost?
e) You have the choice of either paying this loss directly, or allowing it to be taken out of the margin balance. You choose to take it out from your margin. If the continuously compounded interest is 10%, Find your margin balance after two weeks.