Question

a)On Dec. 4, 2019, the nearby S&P 500 contract was trading at 3114.50. What was the...

a)On Dec. 4, 2019, the nearby S&P 500 contract was trading at 3114.50. What was the total value represented by one S&P contract as of the day of that close?

b) If you think the S&P index is likely to go up in the near future, would you buy or sell an S&P futures contract?

c) Assume that in two weeks, the contract closes at 3200. What would be the dollar amount of your profit or loss, given the action you answered for part b? Explain how you arrived at your answer.

d) Currently, the initial margin requirement for an S&P futures contract is $34,650, and the maintenance margin requirement is $31,500.

Given the profit you found in part c, calculate your percentage profit on the trade, given what you had invested (the initial margin requirement).

e) Assume now that the trade went in the opposite direction for that specified in part c. At what contract price would you have gotten a margin call? Explain. How much additional margin will you need to deposit in your account? Explain (looking for this question)

Homework Answers

Answer #1

A) Contract size of S&P Futures is 250 units , hence total value represented by one S&P contract = Contract size x Price of S&P furure contract
=250 x 3114.50
=778625 $

B) If one is expecting S&P index to go up in future, then one should buy S&P futures contract

C) Profit on futures contract = (Market price as at expirt - contracted price) x contract size
=(3200-3114.50) x 250
= 85.50 x 250
=21375 $

D) % Profit = Profit / Initial margin
= 21375/34650
=61.69%

E)

Margin call will occur when account value will fall below 31500$
Thus loss that must occur to bring account value 31500$ = 34650-31500 = 3150$
Thus points that S&P futures must fall = 3150/250
=12.6
Thus S&P future price must fall below 3101.9 $ ($3114.5-$12.6) to get margin call

one must have to bring in cash which makes account value equal to maintenance margin after margin call

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
a)On Dec. 4, 2019, the nearby S&P 500 contract was trading at 3114.50. What was the...
a)On Dec. 4, 2019, the nearby S&P 500 contract was trading at 3114.50. What was the total value represented by one S&P contract as of the day of that close? b) If you think the S&P index is likely to go up in the near future, would you buy or sell an S&P futures contract? c) Assume that in two weeks, the contract closes at 3200. What would be the dollar amount of your profit or loss, given the action...
Suppose the S&P 500 index futures price is currently 1000. One contract of S&P 500 index...
Suppose the S&P 500 index futures price is currently 1000. One contract of S&P 500 index futures has a size of $250× S&P 500 index. You wish to purchase four contracts of futures on margin. Suppose that the initial margin is 10%. Your position is marked to market daily. The interest earnings from the margin account can be ignored. (A) What is the notional value of your position? (B) What is the dollar amount of initial margin? (C) What is...
The margin requirement on the S&P 500 futures contract is 8%, and the stock index is...
The margin requirement on the S&P 500 futures contract is 8%, and the stock index is currently 2,000. Each contract has a multiplier of $50. a. How much margin must be put up for each contract sold? b. If the futures price falls by 2% to 1,960, what will happen to the margin account of an investor who holds one contract? (Input the amount as a positive value.) c-1. What will be the investor's percentage return based on the amount...
Suppose the S&P 500 currently has a level of 960. One contract of S&P 500 index...
Suppose the S&P 500 currently has a level of 960. One contract of S&P 500 index futures has a size of $250× S&P 500 index. You wish to hedge an $800,000-portfolio that has a beta of 1.2. (A)In order to hedge the risk of your portfolio, should you long the futures or short the futures? Why? (B)How many S&P 500 futures contracts should you trade to hedge your portfolio?
On January 1, you sell one April S&P 500 Index futures contract at a futures price...
On January 1, you sell one April S&P 500 Index futures contract at a futures price of 2,300. If the April futures price is 2,400 on February 1, your profit would be __________ if you close your position. (The contract multiplier is 250.) A) $12,500                        B)  -$25,000                 C)  $25,000                   D)  -$12,500 The current level of the S&P 500 index is 2,350. The dividend yield on the S&P 500 is 2%. The risk-free interest rate is 5%with continuous compounding. The futures price quote for a contract on...
Question 1 i) A trader enters into an Australian Dollar futures contract to buy $A150,000 at...
Question 1 i) A trader enters into an Australian Dollar futures contract to buy $A150,000 at a price of US$.8060 per Australian dollar. The initial margin on this contract is US$6,000 and the maintenance margin is $3,100. At what futures price will the maintenance margin level be reached? ii) Suppose that on Feb 10, 2018 you bought an ASX S&P 200 Share Price Index (SPI) futures contract at an index level of 3999. Four weeks later you closed out this...
The S&P 500 is currently valued at $2,700 and the 1-year Mini Future contract has a...
The S&P 500 is currently valued at $2,700 and the 1-year Mini Future contract has a price of $2,767. The risk free rate is 2.5% per annum and the S&P 500 dividend yield is 0.5% per annum. You are managing a portfolio that is worth $10 million and has a beta of 1.75. (Remember E-mini S&P 500 Future contracts are 50 x price) a. What position in futures contracts on the S&P 500 is necessary to hedge the portfolio? b....
Your broker requires an initial margin of $6,075 per futures contract on wheat and a maintenance...
Your broker requires an initial margin of $6,075 per futures contract on wheat and a maintenance margin of $4,500 per contract. Wheat futures contracts are based on 5,000 bushels and quoted in cents per bushel. You sold one wheat futures contract yesterday at the closing settlement price quote of 786. Today, the settlement quote is 808. Will you receive a margin call and if so, for what amount? All margin calls restore the margin level to its initial level. If...
4. Suppose you enter into a CHF futures contract (contract size = 125,000 CHF) as the...
4. Suppose you enter into a CHF futures contract (contract size = 125,000 CHF) as the seller at the end of the day on day 0 at a closing futures price of 0.7335 USD/CHF. Futures prices then evolve as 0.7391 USD/CHF on day 1, 0.7388 USD/CHF on day 2, 0.7352 USD/CHF on day 3, and 0.7297 USD/CHF on day 4. What would your cash flows be at the end of every day? Your initial margin is $2000 and your maintenance...
You have the following market data. The S&P 500 market index currently is 94.87. The annualized,...
You have the following market data. The S&P 500 market index currently is 94.87. The annualized, continuously compounded dividend yield on this index is 3.71%. The futures contract on this index has an index multiplier of 100. The annualized, continuously compounded risk-free rate is 3.41%. The index futures contract that expires in 5 months has a futures price of 80.32. What is the total net profit if you execute the arbitrage strategy with one futures contract? Do not round values...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT