Consider the following information about the CMX gold futures contract: (a) Contract size: 100 troy ounce Initial margin:...

90.2K

Verified Solution

Question

Finance

Consider the following information about the CMX gold futurescontract:
(a) Contract size: 100 troy ounce
Initial margin: $1,013 per contract
Maintenance margin: $750 per contract
Minimum tick size: 10 cents/troy ounce ($10/contract)
There are four traders, A, B, C, and D in the market when nextyeariÌs June contract commences trading. (Kolb Ch3)
(a) Complete the following table showing the open interest forthe contract.
Date
Buyer
Seller
Contracts
Price
Open Interest
July 6
A
B
5
$294.50
July 6
C
B
10
$294.00
July 6
Settlement Price
$294.00
July 7
D
A
10
$293.50
July 7
B
D
5
$293.80
July 7
Settlement Price
$293.80
July 8
B
A
7
$293.70
July 8
Settlement Price
$299.50
(b) Calculate the gains and losses for Trader A. Assume that atthe time of each change in position, Trader A must bring the marginback to the initial margin account. Compute the amount in TraderAiÌs margin account at the end of each trading day. Will Trader Aget a margin call? If so, when and how much additional margin mustbe posted?

Answer & Explanation Solved by verified expert

4.2 Ratings (817 Votes)

As the problem didnt told about the brokerage so we are ignoring the brokerage when ever we need to calculate the profits in the solution a open interest means the number of contracts of a stock or commodity presently in open position in the market in futures and option contracts transactions july 6th B sells A 5 contracts means open interest is 5 A long side and B short side of same contracts B sells C 10 contracts means See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Date	Buyer	Seller	Contracts	Price	Open Interest
July 6	A	B	5	$294.50
July 6	C	B	10	$294.00
July 6	Settlement Price	$294.00
July 7	D	A	10	$293.50
July 7	B	D	5	$293.80
July 7	Settlement Price	$293.80
July 8	B	A	7	$293.70
July 8	Settlement Price	$299.50