Question

can you make the answer short and explain it few words, please

You are long 10 gold futures contracts, established at an initial settle price of $1,500 per ounce, where each contract represents 100 troy ounces. Your initial margin to establish the position is $12,000 per contract and the maintenance margin is $11,200 per contract. Over the subsequent four trading days, gold settles at $1,495, $1,490, $1,505, and $1,515, respectively. Compute the balance in your margin account at the end of each of the four trading days, and compute your total profit or loss at the end of the trading period. Assume that a margin call requires you to fund your account back to the initial margin requirement.

Answer 1

Initial margin = 12000 * 10 contracts = $120,000

Maintainance margin = 11200 *10 contracts = $112,000

Since you went long at futures, and the initial settle price of $1,500 per ounce. Formally, given that each contract is for 100 troy ounces of gold:

Trading day 1 Initial balance in margin account = $120,000  

Day 1 Profit /(loss) = $(1495 - 1500) x 100 x 10 = ($5,000) Loss

Day 2 Profit /(loss) = $(1490 - 1500) x 100 x 10 = ($10,000) Loss

Day 3 Profit /(loss) = $(1505 - 1500) x 100 x 10 = $5,000 Profit

Day 4 Profit /(loss) = $(1515 - 1500) x 100 x 10 = $15,000 Profit

Net Profit at the end of Trading period = $20,000 Profit - $15,000 Loss = $5,000 Profit