12. You are long 10 gold futures contracts, established at an initial settle pri
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Question
12. You are long 10 gold futures contracts, established at an initial settle price of $1500 per ounce, where each contract represents 100 troy ounces. Your initial margin to establish the position is $12000 per contract, and the maintenance margin is $11,200 per contract. Over the subsequent four trading days, gold settles at $1495, $1490, $1505, and $1515, respectively. Compute the balance in your margin account at the end of each of the four trading days, and compute your total profit or loss at the end of the end of each of the four trading days, and compute your total profit or loss at the end of the trading period. Assume that a margin call requires you to fund your account back to the initial margin requirements.
Explanation / Answer
Initial margin = 12000 * 10 contracts = 120,000
Maintainance margin = 11200 *10 = 112,000
Total profit /(loss) = (5000)+(5000) + 15000 +10000
= $ 15,000 profit
Trading day Initial balance in margin account 120,000 1 Profit /(loss) on 1 day [(1495 -1500)*100*10] (5000) Balance at the end of 1 trading day 115,000 2 Pofit /(loss) on 2 day [ (1490-1495)*100*10] (5000) Balance at the end of 2 trading day 110,000 since balance falls below maintenance margin , margin call will be made so as to reach balance again to maintenance margin 10,000 Balance at the end of 2 trading day(revised) 120,000 3 Profit /(loss) on 3 trading day [(1505-1490)*100*10] 15000 Balance at the end of 3 trading day 135,000 4 Profit /(loss) on 4 trading day [( 1515-1505)*100*10] 10000 Balance at the end of 4 trading day 145,000Related Questions
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