PQU stock trades for $56/share on 9/30, but you believe the stock price will dec

Question

PQU stock trades for $56/share on 9/30, but you believe the stock price will decline over the next few days. You decide to use five futures contracts to trade based on your belief. Futures contracts on PQU have 125 shares attached. The price for PQU futures on 9/30 is $54/share. Your broker requires an initial margin of $3000 per contract and a maintenance margin of $1500 per contract.

Find your return on invested capital if you close your position when PQU trades at $65/share.

-.375

.2432

-.2973

.375

-.375

.2432

-.2973

.375

Explanation / Answer

Initial margin invested = Margin per contract * No.of contracts

= $ 3,000 * 5

= $ 15,000

Return on capital invested = Change in Margin account / Initial investment

= { ( closing future price - OPening future price ) * No. of contracts * shares in a contract } / initial margin

= { ($ 65 - $ 54 ) * 5 * 125 } / $15,000

= $ 6,875 / $ 15,000

= 45.83%

OPtion is not in the list

Pls Comment if further assistance is required

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