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1. Complete the following tables (the example from the course): We start with the assumption that the futures price is 100$ when the transaction opens, the initial margin requirement is 5$, and the maintenance margin requirement is 3$. Table 1. Holder of long position of 10 contracts Day Beginning Funds Settlement Futures price change (5) Gain/Loss (6) Ending balance (7) (1) balance (2) deposited (3) price (4) 0 100.00 99.20 96.00 101.00 103.50 103.00 104.00 Table 2. Holder of short position of 10 contracts Settlement Futures price Ending balance (7) change (5) 12345 6 Day (1) 0 1 2 3 4 5 6 Beginning balance (2) Funds deposited (3) price (4) 100.00 99.20 96.00 101.00 103.50 103.00 104.00 Gain/Loss (6)

1. Complete the following tables (the example from the course): We start with the assumption that the futures price is 100$ when the transaction opens, the initial margin requirement is 5$, and the maintenance margin requirement is 3$. Table 1. Holder of long position of 10 contracts Day Beginning Funds Settlement Futures price change (5) Gain/Loss (6) Ending balance (7) (1) balance (2) deposited (3) price (4) 0 100.00 99.20 96.00 101.00 103.50 103.00 104.00 Table 2. Holder of short position of 10 contracts Settlement Futures price Ending balance (7) change (5) 12345 6 Day (1) 0 1 2 3 4 5 6 Beginning balance (2) Funds deposited (3) price (4) 100.00 99.20 96.00 101.00 103.50 103.00 104.00 Gain/Loss (6)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1. Complete the following tables (the example from the course): We start with the assumption that the futures price is 100$ when the transaction opens, the initial margin requirement is 5$, and the maintenance margin requirement is 3$. Table 1. Holder of long position of 10 contracts Day Beginning Funds Settlement Futures price change (5) Gain/Loss (6) Ending balance (7) (1) balance (2) deposited (3) price (4) 0 100.00 99.20 96.00 101.00 103.50 103.00 6 104.00 Table 2. Holder of short position of 10 contracts Day Funds Settlement Beginning balance (2) Futures price change (5) Gain/Loss (6) Ending balance (7) (1) deposited (3) price (4) 0 100.00 1 99.20 2 96.00 3 101.00 4 103.50 5 103.00 6 104.00 2. Suppose that an European call option on 1000 shares has the strike price 22 $/share and the premium 0.8 $/share. a) What will be the buyer's payoff if the spot price at maturity is 23.1 $/share? Draw the diagram. b) What will be the seller's (writer) payoff if the spot price at maturity is 22.4 $/share? Draw the diagram. c) What will be the maximum loss for the option buyer and for the option seller? d) If the spot price at maturity is 19 $/share, the call option is ITM, ATM or OTM? e) For which value of the spot price the call option is ATM? 3. Suppose that an European put option on 1000 shares has the strike price 9 $/share and the premium 0.5 $/share. a) What will be the maximum loss and the maximum profit for the option buyer? b) What will be the seller's payoff if the spot price at maturity is 9.3 $/share? Draw the diagram. c) What will be the buyer's payoff if the spot price at maturity is 8.2 $/share? Draw the diagram. d) If the spot price at maturity is 8.7 $/share, the put option is ITM, ATM or OTM? e) For which value of the spot price the put option is ATM? 1 2 3 4 5
Transcribed Image Text:1. Complete the following tables (the example from the course): We start with the assumption that the futures price is 100$ when the transaction opens, the initial margin requirement is 5$, and the maintenance margin requirement is 3$. Table 1. Holder of long position of 10 contracts Day Beginning Funds Settlement Futures price change (5) Gain/Loss (6) Ending balance (7) (1) balance (2) deposited (3) price (4) 0 100.00 99.20 96.00 101.00 103.50 103.00 6 104.00 Table 2. Holder of short position of 10 contracts Day Funds Settlement Beginning balance (2) Futures price change (5) Gain/Loss (6) Ending balance (7) (1) deposited (3) price (4) 0 100.00 1 99.20 2 96.00 3 101.00 4 103.50 5 103.00 6 104.00 2. Suppose that an European call option on 1000 shares has the strike price 22 $/share and the premium 0.8 $/share. a) What will be the buyer's payoff if the spot price at maturity is 23.1 $/share? Draw the diagram. b) What will be the seller's (writer) payoff if the spot price at maturity is 22.4 $/share? Draw the diagram. c) What will be the maximum loss for the option buyer and for the option seller? d) If the spot price at maturity is 19 $/share, the call option is ITM, ATM or OTM? e) For which value of the spot price the call option is ATM? 3. Suppose that an European put option on 1000 shares has the strike price 9 $/share and the premium 0.5 $/share. a) What will be the maximum loss and the maximum profit for the option buyer? b) What will be the seller's payoff if the spot price at maturity is 9.3 $/share? Draw the diagram. c) What will be the buyer's payoff if the spot price at maturity is 8.2 $/share? Draw the diagram. d) If the spot price at maturity is 8.7 $/share, the put option is ITM, ATM or OTM? e) For which value of the spot price the put option is ATM? 1 2 3 4 5
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