Question

Question 2-7 are based on the following series of futures price (F(0), F(1),... F(6)):

Day 0: F(0)=$212

Day 1: F(1)=$211

Day 2: F(2)=$214

Day 3: F(3)=$209

Day 4: F(4)=$210

Day 5: F(5)=$202

Day 6: F(6)=$200

Suppose you are going to long 20 contracts. The initial margin=$10 per contract, and the maintenance margin is $2.

First Question from the set of information: how much do you need to deposit in the trading account at Day 0?

Using the same set of information from Question 2,  what is the ending balance in Day 1?

Using the same set of information from Question 2, figure out what is the first day, on which, you receive margin call and need to put extra money into the trading account?

Using the same set of information from Question 2, answering what is the additional fund that needs to put into account on Day 6?

Using the same set of information from Question 2, answering what is the ending balance at Day 6?

Using the same set of information from Question 2, answering which day has the largest gain among the 6 days?

Answer 1

Initial margin = $ 10 per contract, Number of contract, N = 20, Maintenance margin = $ 2 per contract

Initial margin = 10 x N = 10 x 20 = $ 200

Maintenance margin = $ 2 x 20 = $ 40

Please see the table below. Please see the second row to understand the mathematics:

Day	Rate	Daily Gain / Loss	Balance	Maintenance margin required	Margin Call amount	Closing Balance
n	F(n)	A(n) = [F(n) - F(n-1)] x 20	B(n) = D(n-1) + A	M = 40	C = max (M - B(n), 0)	D(n) = B(n) + C
0	212		200	40	0	200
1	211	-20	180	40	0	180
2	214	60	240	40	0	240
3	209	-100	140	40	0	140
4	210	20	160	40	0	160
5	202	-160	0	40	40	40
6	200	-40	0	40	40	40

First Question from the set of information: how much do you need to deposit in the trading account at Day 0?

Initial margin = 10 x N = 10 x 20 = $ 200

Using the same set of information from Question 2,  what is the ending balance in Day 1?

$ 180 (Please see the highlighted cell in yellow color corresponding to n = 1 in the table above.

Using the same set of information from Question 2, figure out what is the first day, on which, you receive margin call and need to put extra money into the trading account?

Day 5. Please see the cell highlighted in yellow color corresponding to n = 5.

Using the same set of information from Question 2, answering what is the additional fund that needs to put into account on Day 6?

$ 40. Please see the cell highlighted in yellow corresponding to n = 6; refer to Margin Call amount column.

Using the same set of information from Question 2, answering what is the ending balance at Day 6?

$ 40, Please see the cell highlighted in yellow corresponding to n = 6; refer to closing balance column.

Using the same set of information from Question 2, answering which day has the largest gain among the 6 days?

Day 2; Refer to Daily Gain / Loss Column. It shows highest gain of $ 60 corresponding to day 2.