67. Contract Specifications include the Product, the Exchange, the size of the C

Question

67. Contract Specifications include the Product, the Exchange, the size of the Contract,

The method of Valuing Contract, and the delivery month. T or F

68. The ________ is the current cash price of a particular commodity minus the price of a futures contract for the same commodity.

69. Assume the initial margin for a commodity is $1600 and the maintenance margin is $1100. Investor Andrew has already sustained a loss of $150 on the first day after purchasing a contract and another $350 on the second day. If the price drops by 4¢ the following day another $200 loss is registered. The value of the margin account would be down $________. Would Andrew receive a margin call? T or F

70. A Reversing Trade--brings a trader’s net position in some futures contract back to a positive position. T or F

Explanation / Answer

Ans. 67) True, Contract should have all these specification for understanding of all the parties of the contract.

68) The storage cost is the current cash price of a particular commodity minus the price of Future contract of same commodity.

69) Initial Magin = $1600, maintenance margin = $ 1100. Now, margin call will happen when the initial margin level goes below to the maintenance margin. Now, Loss in the last 3 transactions = 150+ 350+200 = $700

So, Margin level of account = 1600-700 = $900

$900<$1100 , hence, the margin call will take place.Andrew receive the margin call.

70) False, Reversing trade brings a traders net position in some future contract back to zero position and not positive position.

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