11. Suppose S&P 500 index futures price is currently 1200. You wish to purchase four futures...

11. Suppose S&P 500 index futures price is currently 1200. You wish to purchase four futures contracts on margin

a. What is the notional value of your position?

b. Assuming 10% initial margin, what is the value of the initial margin?

c. Assume there is no interest rate on your margin account and the maintenance margin is 80% of initial margin. What is the greatest S&P 500 index futures price at which will you receive a margin call?

Solutions

Expert Solution

a. notional price = number of cntract * price

= 4* 1200

= 4800

b. initial margin = price * initial margin percentage

= 1200* 0.10

= 120 per contract

ie, for 4 contracts = 120*4

= 480

c. Marginal call price =( (1+initial margin)/(1+ maintanance margin ) ) * price

= ( (1 +0.10) /(1+0.80) ) * 1200

= 733.33 per contract

ie, for 4 contracts, = 733.33* 4

= 2933.32

jeff jeffy answered 2 years ago

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