Question

Assume the current spot price of a Bitcoin is $11,270 and the future price on a March 2018 contract is $11,420 per Bitcoin. You enter into 3 long future contracts today (1/29/18), and each contract is for 5 Bitcoins. Your initial margin is $5,000 per contract and your margin call occurs at $3,500 per contract.

Date Price

1/29/18   11,310

1/30/18   11,460

1/31/18   11,600

2/1/18 11,410

2/2/18   11,150

2/5/18   10,900

2/6/18   10,990

2/7/18   10,790

What does your margin account have in it at the end of each day? What does your counterparty’s margin account have in it at the end of each day? The risk-free rate is 2.60% per annum with daily compounding (assume 260 day year). If there is a margin call, note that there is a margin call and record that you deposit the necessary money into the account as a separate transaction instantaneously, i.e. if on 2/2 you needed to put in $1,500 at the end of the day you should show a deposit of $1,500 on 2/2 after the close of the day.

Answer 1

Margin at end of Day 1 : ($5000 * 3 contracts) + (closing price of bitcoin future - $11,420) * 3

=$14,670

Margin at end of Day 1 for counterparty: ($5000 * 3 contracts) + ($11,420 - closing price of bitcoin future) * 3

= $15,330

We calculate in the same way for each day as shown below :

The margin call occurs at $3,500 per contract, or a margin balance of (3 * $3,500) , which is $10,500

As the margin balance is never less than $10.500, there is no margin call