Asisgnment: Futures
1. An investor enters into a short futures position in 10 contracts in gold at a futures price of $276.50 per oz. The size of one futures contract is 100 oz. The initial margin per contract is $1,500, and the maintenance margin is $1,100.
1. What is the initial size of the margin account?
2. Suppose the futures settlement price on the first day is $278.00 per oz. What is the new balance in the margin account? Does a margin call occur? If so, assume that the account is topped back to its original level.
3. The futures settlement price on the second day is $281.00 per oz. What is the new balance in the margin account? Does a margin call occur? If so, assume that the account is topped back to its original level.
4. On the third day, the investor closes out the short position at a futures price of $276.00. What is the final balance in his margin account?
5. Ignoring interest costs, what are his total gains or losses?
2. The current price of gold is $864 per troy ounce. Assume that you initiate a long position in 10 COMEX gold futures contracts at this price on 7-July-2016. The initial margin is 7% of the initial price of the futures, and the maintenance margin is 5% of the initial price. Assume the following evolution of gold prices over the next five days, and compute the margin account assuming that you meet all margin calls.
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