Question

Suppose you are long 8 gold futures contracts, established at an initial settle price of $1,325 per ounce. Each contract represents 100 troy ounces. The initial margin to establish the position is $4,950 per contract, and the maintenance margin is $4,500 per contract (these were the margin requirements on the CME on June 3, 2019). Over the subsequent four trading days, gold settles at $1,330, $1,315, 1,300, and $1,310, respectively. Compute the balances on your futures position and on your margin account at the end of the day you enter the position and on each of the subsequent four trading days. Clearly identify the days you would have received a margin call and the amount of each margin call. In addition, compute your total profit or loss at the end of the trading period. Assume that a margin call requires you to restore your margin account to its initial requirement.

Answer 1

Day	Settlement price per troy ounce	Mark-to-Market	Other Entries	Account Balance	Explanation	Margin Call? Y/N
0	$                 1,325.00	$     10,60,000	$ 39,600	$            39,600	Initial Margin Deposit	N
1	$                 1,330.00	$     10,64,000		$            43,600		N
2	$                 1,315.00	$     10,52,000	$ 8,000	$            39,600	Margin call	Y
3	$                 1,300.00	$     10,40,000	$ 12,000	$            39,600	Margin call	Y
4	$                 1,310.00	$     10,48,000	$              -	$            47,600		N
Amount withdrawn on closure of position =			$ 47,600
Loss = 47600-(39600+8000+12000) =			$         -12,000
Alternatively: Loss = 1048000-1060000 =			$         -12,000
NOTE:
Maintenance margin requirement = $4500*8 =			$          36,000