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Suppose that you enter into a short futures contract to sell July silver for $29.80 per...

  1. Suppose that you enter into a short futures contract to sell July silver for $29.80 per ounce. The size of the contract is 5000 ounces. The initial margin is $ 3500, and the maintenance margin is $2500. What change in the futures price will lead to a margin call?
  1. A trader buys two July futures contracts on orange juice. Each contract is for the delivery of 15,000 pounds. The current futures price is 170 cents per pound, the initial margin is $6500 per contract, and the maintenance margin is $5000 per contract.
    1. What price change would lead to a margin call?
    2. Under what circumstances could $2000 be withdrawn from the margin account?

  1. Suppose now is the expiry of March silver futures contract. The future’s price of silver is now $19.7/oz, and the silver is trading at $14.7/oz in the spot market. Design an arbitrage strategy with detailed steps and show how it can end up with positive profit without risk, without initial investment.
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