In January 5th of 2018, you took a short position on 100 Feeder Cattle futures contracts that matures in September 2018. The maintenance margin is 60% of the contract size (= 148.05 * 100 * 60%) and if your margin goes below the maintenance margin you will get a margin call. Determine the following: 1) Based on futures prices in January 5h, what is the market's expectation on future price movements of cattle spots? 2) Based on your position, are you a hedger or a speculator? 3) As of at the end of Apr 2018, is this position profitable? 4) Did you have any margin calls before the end of April? Futures (January 5, 2018) in U.S. Fed Cattle Close Change 0.00 Feeder Cattle Close 149.03 Change 3.43 February 2018 April 2018 January 2018 March 2018 122.25 123.83 1.08 145.55 3.33 April 2018 May 2018 August 2018 September 2018 June 2018 114.85 1.02 145.83 3.15 August 2018 October 2018 December 2018 111.73 1.30 145.48 3.30 148.48 148.05 112.95 1.73 2.40 115.08 1.45 2.18 Feeder Cattle Spot Price FEEDER CATTLE 170 160 150 140 130 120 Jan 2017 Apr 2017 Jul 2017 Oct 2017 Jan 2018 Apr 2018
In January 5th of 2018, you took a short position on 100 Feeder Cattle futures contracts that matures in September 2018. The maintenance margin is 60% of the contract size (= 148.05 * 100 * 60%) and if your margin goes below the maintenance margin you will get a margin call. Determine the following: 1) Based on futures prices in January 5h, what is the market's expectation on future price movements of cattle spots? 2) Based on your position, are you a hedger or a speculator? 3) As of at the end of Apr 2018, is this position profitable? 4) Did you have any margin calls before the end of April? Futures (January 5, 2018) in U.S. Fed Cattle Close Change 0.00 Feeder Cattle Close 149.03 Change 3.43 February 2018 April 2018 January 2018 March 2018 122.25 123.83 1.08 145.55 3.33 April 2018 May 2018 August 2018 September 2018 June 2018 114.85 1.02 145.83 3.15 August 2018 October 2018 December 2018 111.73 1.30 145.48 3.30 148.48 148.05 112.95 1.73 2.40 115.08 1.45 2.18 Feeder Cattle Spot Price FEEDER CATTLE 170 160 150 140 130 120 Jan 2017 Apr 2017 Jul 2017 Oct 2017 Jan 2018 Apr 2018
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:In January 5th of 2018, you took a short position on 100 Feeder Cattle futures contracts that matures
in September 2018. The maintenance margin is 60% of the contract size (= 148.05 * 100 * 60%)
and if your margin goes below the maintenance margin you will get a margin call. Determine the
following: 1) Based on futures prices in January 5h, what is the market's expectation on future
price movements of cattle spots? 2) Based on your position, are you a hedger or a speculator? 3)
As of at the end of Apr 2018, is this position profitable? 4) Did you have any margin calls before
the end of April?
Transcribed Image Text:Futures (January 5, 2018) in U.S.
Fed Cattle
Close
Change
0.00
Feeder Cattle
Close
149.03
Change
3.43
February 2018
April 2018
January 2018
March 2018
122.25
123.83
1.08
145.55
3.33
April 2018
May 2018
August 2018
September 2018
June 2018
114.85
1.02
145.83
3.15
August 2018
October 2018
December 2018
111.73
1.30
145.48
3.30
148.48
148.05
112.95
1.73
2.40
115.08
1.45
2.18
Feeder Cattle Spot Price
FEEDER CATTLE
170
160
150
140
130
120
Jan 2017
Apr 2017
Jul 2017
Oct 2017
Jan 2018
Apr 2018
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