Today is 1 March 2018 and you have been allocated $A10 million that you will be required to use to trade futures contracts. The following will be your trading instructions over coming weeks.
Trading in the 90-day bank-accepted bill contract
03/04/2018 Opening price of 98.100
03/04/2018 Closing price of 98.070
07/05/2018 Close out position of 98.040
On Tuesday 3 April 2018, you will be required to enter into four June 2018 90-day bank accepted bill contracts. You may enter into these contracts as a buyer or as a seller. Whether you enter into these contracts as a buyer or a seller will depend on your expectations as to the likely direction of short-term interest rates. Again, you should state a logical basis for entering into these contracts as a buyer or seller. For example, you might speculate that short-term interest rates are likely to rise or fall. Note that again the basis of your speculation is of lesser importance here than is demonstrating that you understand fully the nature of the transactions that you enter into. Using the closing price of the June 2018 90-day bank accepted bill contract on Tuesday 3 April 2018, detail your financial position after you have entered into these four contracts. You should ignore margin calls but you should include in your discussion the deposit that you were required to provide. On Monday 7 May 2018, you must close out your position and do so at the closing price of the June 2018 90-day bank accepted bill contract. Provide a full report of the profit or loss that you made and explain why this occurred.
Trading in the 10-year Treasury bond futures contract
20/03/2018 Opening price of 97.28
20/03/2018 Closing price of 97.2850
03/05/2018 Close out position at 97.1700
On Tuesday 20 March 2018, you will be required to enter into five June 2018 10-year bond futures contracts. You may enter into these contracts as a buyer or as a seller. Whether you enter into these contracts as a buyer or a seller will depend on your expectations as to the likely direction of long-term interest rates. Again, you should state a logical basis for entering into these contracts as a buyer or seller. For example, you might speculate that long-term interest rates are likely to rise or fall. Note that again the basis of your speculation is of lesser importance here than is demonstrating that you understand fully the nature of the transactions that you enter into. Using the closing price of the June 2018 10-year bond futures contract on Tuesday 20 March 2018, detail your financial position after you have entered into these five contracts. You should ignore margin calls but you should include in your discussion the deposit that you were required to provide. On Thursday 3 May 2018, you must close out your position and do so at the closing price of the June 2018 10-year bond futures contract. Provide a full report of the profit or loss that you made and explain why this occurred.
Trading in the SPI200 futures contract
26/04/2018 Opening price of 5861.0
26/04/2018 Closing price of 5895.0
03/05/2018 Close out position at 6,079.0
On Thursday 26 April 2018, you will be required to enter into six June 2018 SPI200 futures contracts. You may enter into these contracts as a buyer or as a seller. Whether you enter into these contracts as a buyer or a seller will depend on your expectations as to the likely direction of the Australian share market. Again, you should state a logical basis for entering into these contracts as a buyer or seller. For example, you might speculate that growth of the Chinese economy is likely to be weaker (stronger) than expected, suggesting that the Australian market will fall (rise). Note that again the basis of your speculation is of lesser importance here than is demonstrating that you understand fully the nature of the transactions that you enter into. Using the closing price of the June 2018 SPI200 futures contract on Thursday 26 April 2018, detail your financial position after you have entered into these six contracts. You should ignore margin calls but you should include in your discussion the deposit that you were required to provide. On Thursday 3 May 2018 you must close out your position and do so at the closing price of the June 2018 SPI200 futures contract. Provide a full report of the profit or loss that you made and explain why this occurred.
Trading in the SPI200 futures contract
On Monday 26 March 2018, you will be notified that your company has a reasonably broadly based portfolio of Australian shares valued on that date at $70,587,239. You will be required to seek protect the value of that portfolio as the company intends to liquidate the portfolio on or about 19 May 2018. You will seek to do this by entering into a number of June 2018 SPI200 futures contracts as either a buyer or a seller. On Monday 7 May 2018, you will be notified that the portfolio of shares has been sold for $75,987,431. The increase in the value of the portfolio was largely due the fact that it was not as broadly based as you had been told, and two companies that formed a large part of the portfolio had been subject to takeover offers during the period. You must now on Monday 7 May 2018 close out your position and do so at the closing price of the June 2018 SPI200 futures contract. Provide a full report of the profit or loss that you made and explain why this occurred.