Project #50967 - Futures Contact

Problem Set 8

(Due Tuesday, Dec. 9)

 

 

1.   (50 pts) 

 

a.   (10 pts)

 

Briefly describe what a futures contract is.

A Futures contract is an exchange of promises where both the parties put up “margin” and are obligated to buy/sell.

 

b.   (20 pts)

 

What is the difference between initial margin and maintenance margin on a futures contract?

 

c.   (20 pts)

 

One futures contract on orange juice is equal to 15,000 lbs. of juice.  Recently, the  contract was trading at around $ 1.46/lb.  The initial margin for an orange juice contract is $1,320, approximately what is the leverage an investor enjoys by trading this commodity?

 

 

2.   (50 pts)

 

The “big” S&P stock index futures contract trades only “in the pit,” whereas the “E-mini” S&P contract trades only electronically.  The E-mini contract is worth 1/5 of the value of the “big” contract.

 

a.   (10 pts)

 

      Recently, the E-mini contract closed at 2065.   What was the total value represented by one E-mini S&P contract as of the day of that close?

 

b.   (5 pts)

 

      If you think the S&P index is likely to go up in the near future, would you buy or sell an E-mini futures contract? 

 

 

 

 

 

c.   (5 pts)

 

Based on the margin requirements given at:

 

http://insigniafutures.com/futures-education-resources/margins.html

     

      how much initial margin would you have to put up to buy or sell 1 contract?

 

d.   (15 pts)

 

      Assume that in two weeks, the contract closes at 2000.  What would be your profit or loss, given the action you answered for part b?

 

e.   (15 pts)

 

      Assume now that the trade went against you, i.e., the price of the contract goes down instead of up.  At what contract price would you have gotten a margin call?  How much additional margin will you need to deposit in your account?

Subject Business
Due By (Pacific Time) 12/09/2014 12:00 am
Report DMCA
TutorRating
pallavi

Chat Now!

out of 1971 reviews
More..
amosmm

Chat Now!

out of 766 reviews
More..
PhyzKyd

Chat Now!

out of 1164 reviews
More..
rajdeep77

Chat Now!

out of 721 reviews
More..
sctys

Chat Now!

out of 1600 reviews
More..
sharadgreen

Chat Now!

out of 770 reviews
More..
topnotcher

Chat Now!

out of 766 reviews
More..
XXXIAO

Chat Now!

out of 680 reviews
More..
All Rights Reserved. Copyright by AceMyHW.com - Copyright Policy