Question

Today's settlement price on a Chicago Mercantile Exchange (CME) € futures contract is $1.7537/€. Your initial performance bond is at $2,000. The maintenance performance bond is $1,600. The next three days' settlement prices are $1.7670/€, $1.7219/€, and $1.6985/€. (The contractual size of one CME € contract is €62,500). You take a long position in one futures contract (buy €), what is the total additional fund you need to deposit so that you keep your marginal account for the three days?

A. $2836.85

B. $0, because the balance never drops below the "margin call".

C. $1438.65

D. $1987.50

Answer 1

Solution:

When we are long in one future contract at $1.7537/€ . The contract size is  €62,500,  initial margin is $2000 and maintenance margin is $1600.

Current value of the future contract =  €62,500 * $1.7537/€ = $109,606.25

Initial margin = $2000

Borrowed money = $109,606.25 - $2000 = 107606.25

Exchange rate	Value	Equity	Borrowed Amt	Margin Call
$1.7537/€	109606.3	2000	107606.3
$1.7670/€	110437.5	=110437.5 - 107606.3 = 2831.25		No Equity Value > 1600
$1.7219/€	107618.8	= 107618.8 -107606.3 = 12.5		Yes : 2000-12.5 = 1987.5
$1.6985/€	106156.3

Correct answer is D) Margin call of $1987.50

answered by: anonymous