Suppose that on September 05, 2021, a company takes a short position in one April 2022 live- cattle futures contract. One contract is for the delivery of 50,000 pounds of cattle. The initialmargin for each contract is $\$ 3, 000 $ and the maintenance margin is $\$ 2,000 $. Thefutures price (per pound) is 180.00 cents when it enters into the contract.(a) If the companyreceives a margin call at the end of the third day to deposit a variation margin of $1250, whatis the settlement price at the end of the day?

To calculate the settlement price at the end of the day, we need to determine the gain or loss on…

Answered: Suppose that on September 05, 2021, a…

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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Assume today's settlement price on a CME EUR futures contract is $1.3170/EUR. You have a long position in one contract. Your performance bond account currently has a balance of $3,200. The next three days' settlement prices are $1.3156, $1.3163, and $1.3079. Calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account after the third day. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Changes in the performance bond account I
Fred enters into a futures contract to buy 10,000 pounds of cotton for $8 per pound. The initial margin is 5% of contract value, and the maintenance margin is 75% of the initial margin. What price (per pound) of cotton futures will trigger a margin call? ______. What amount would Fred’s broker have to post in response to this margin call? ______.
June 2019 Mexican peso futures contract has a price of $0.05197 per MXN. You believe the spot price in June will be 0.05831 per MXN a. What speculative position would you enter into to attempt to profit from your beliefs? O Short position O Long Position b. Calculate your anticipated profits, assuming you take a position in three contracts. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Anticipated profit c. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes? (A Negative value should be indicated with a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number)
A trader enters into a short cotton forward contract when the forwards price is 50 cents per pound. The contract is for the delivery of 50000 pounds. How much does the trader gain or lose if the cotton price at the end of the contract is? 20 cents per pound 30 cents per pound In what price forward will be at the money, in the money, and out-the money?
An investor enters a long position in a Bitcoin April 2023 futures contract at $23,450. Each contract controls 5 bitcoins. The initial margin for each contract is $30,800, the maintenance margin is $28,000. The futures price changes to $23,020 at the end of the first day and $22,752 on the end of the second day. Compute the amount in the margin account at the end of each day for the long position and any variation margin needed. (Please provide a step-by-step solution on how to solve this problem with a calculator, thank you!)
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When opening a new position on futures contract, a broker requires initial margin of 15% (of the initial contract size). The broker requires an investor to replenish his margin account when the balance falls below the maintenance margin of 10% (of initial contract size). What is the margin account balance of short trader at t=3? Futures prices each day are given below. They opened 10 contracts, and contract size is 100 bushels. t-0 (initial trade) t-1 t-2 t=3 a) $150 Ob) $240 Oc) $120 d) $60 Futures Price (per bushel) $0.4 $0.45 $0.35 $0.36 Long Position Margin Short Position Margin ???
As of March 9, 2021, the price of GameStop Corp. (ticker: GME) is $246.90 and its closing price on March 10, 2020 is $4.23. You believe GME is overvalued and decide to short-sell GME. You have $156,912 worth of Treasury Bills in your brokerage account that can be used as collateral. Your broker requires an initial margin of 50% and a maintenance margin of 43%. You must also set aside 100% of the cash proceeds as collateral. You decide to short as many shares as you can with the collateral you have. Pay special attention that you cannot purchase/sell/trade fractional shares. How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, by how much the stock price could move in the "wrong" direction before you receive a margin call? Enter a number with two decimal points.
Suppose the initial margin on heating oil futures is $20, 200, the maintenance margin is S 16, 500 per contract, and you establish a long position of 12 contracts today, where each contract represents 27,000 gallons. Tomorrow, the contract settles down 5.07 from the previous day's price. What is the maximum price decline on the contract that you can sustain without getting a margin call?
June 2021 Mexican peso futures contract has a price of $0.05194 per MXN. You believe the spot price in June will be $0.04525 per MXN. Required: a. What speculative position would you enter into to attempt to profit from your beliefs? b. Calculate your anticipated profits, assuming you take a position in three contracts. c. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes? Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate your anticipated profits, assuming you take a position in three contracts. Note: Do not round intermediate calculations. Round your answer to the nearest whole number. Anticipated profit
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