A Forwand contracts have no defalt riskB Futures contracts roquire an initial margin requirement be paid.c Forward contracts are markod to market daily-D. Forward contract buyers and sellers do not know who the counterparty iSE. Fuures contracts are caly traded over the counter18. You have agreed to deliver the underlying conmmodity on a futures contract in 90 days. Todaythe underlying commodity peice rises and you get a margin call. You must haveA. a long position in a fatures contractB. a short position in a futures contractC. sold a forward contractD. purchased a forward contractE purchased a call option on a futures contract19. You have taken a stock option position and, if the stock's price drops, you will get a levelgain no matter how far prices fall, but you could go bankrupt if the stock's price rises. You have

In short position, for future contract if the price of the contract raises, the seller become…

Answered: A Forwand contracts have no defalt risk…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A trader takes a view that March KLSE CI futures which are currently trading at 1188.60 are about to enter a downtrend. Should the trader go long or short futures. Assuming the trader maintains their original position until expiry and the cash settlement price is 1185.40, what will be the profit or loss? The contract size is RM50 per contract.
Consider a hypothetical futures contract where the current price is $ 212. The initial margin requirement is $ 10 and the maintenance margin requirement is $ 8. You enter into long 20 contracts and meet all margin requirements, but do not withdraw any excess margin. B. Complete the table below and explain all deposited funds. Suppose the contract was purchased at the settlement price of that day, so there is no gain or loss at current market prices on the day of purchase. C. What is your total profit or loss by the end of Day 6?
You buy a 25, 000 pound copper futures contract at $3.1165 per pound with an initial margin requirement of $5000, and maintenance margin of $3000. What is your percent returmuf instead copper decreased to $3.06597-25%-5%-2% -0,2% 2 Speculators in futures markets provide liquidity which raises transaction costs lowers transaction costs, increases excess volaillity causes panics and crashes.
1)Demonstrate how a Margin Account operates for both the Long and the Short futures position using the following information (you do not need to adjust the values given for contract size or number of contracts): The initial margin is R30. The initial Futures price is R100. On Day 1 the price drops to R90. On Day 2 the price rises to R95. Fill in the correct monetary values for the margin account values (a) through to (f) in your answer booklet. Take care to show the signs (negative and positive) of your cash flows. LONG SHORT DAY 0 (a) (b) DAY 1 (c) (d) DAY 2 (e) (f)
Demonstrate how a Margin Account operates for both the Long and the Short futures position using the following information (you do not need to adjust the values given for contract size or number of contracts): [6 marks] The initial margin is R30. The initial Futures price is R100. On Day 1 the price drops to R90. On Day 2 the price rises to R95. Fill in the correct monetary values for the margin account values (a) through to (f) in your answer booklet. Take care to show the signs (negative and positive) of your cash flows. LONG SHORT DAY 0 (a) (b) DAY 1 (c) (d) DAY 2 (e) (f) REQUIRED : (A) , (B) , (C) , (D) ,(E) ,(F)
Which statement is true about the difference between futures and forward contracts? 1. If there are significant price fluctuations before the maturity date, futures contracts can lead to more unfavorable results compared to forward contracts. 2. None of them. 3. Futures contracts are settled at the end of the maturity, while forward contracts are settled daily. 4. Futures contracts are traded on the exchange, while forward contracts are traded on CCP. 5. Futures contracts have a fixed price, while forward contracts have a price determined at the maturity.
Suppose that you enter into a short futures contract to sell July silver for $17.20 per ounce. The size of the contract is 5,000 ounces. The initial margin is $4,000, and the maintenance margin is $3,000.What change in the futures price will lead to a margin call?What happens if you do not meet the margin call?
(a) The transferring of risk onto the clearing house is not something unique to futures trading. In fact, most of financial intermediaries such as insurance companies, finance companies and bank take on risk transferred to them and manage these risks. Based on the above statement, discuss the TWO (2) types of margins in derivatives markets. (b) You as a farmer have gone short 15 March Cocoa futures contracts. The 5-day period using hypothetical futures settlement prices. On the day 0 which both parties enter the contract. Given the following information, determine the daily marking-to-market adjustment to both you and the counterparty account. (Assuming same total value) Contract size = 10 tons per contract Initial margin = 10 percent of total value Maintenance margin = 70 percent of initial margin
Demonstrate how a margin account operates for both the long and the short futures position using the following information ( you do not need to adjust the values given for contract size or number of contracts) The initial margin is R30 The initial future price is R100 On day 1 the price drops to R90 On day 2 the price rises to R95. Fill in the correct monetary values for the margin account values (a) through to (f) in your answer booklet.Take care to show the signs (negative and positive) of your cash flows
The futures price of a commodity such as wheat is $2.50 a bushel. Futures contracts are for 10,000 bushels, and the margin requirement is $2,500 a contract. The maintenance market requirement is $1,000. A speculator expects the price of the commodity to rise and enters into a contract to buy wheat. d. If the futures price rises to $2.70, what must the speculator do? e. If the futures price continues to decline to $2.32, how much does the speculatorhave in the account?
A copper futures contract requires the long trader to buy £ 25,000 of copper. The trader buys one November copper futures contract at $ 0.75 per pound. According to historical data, copper prices moved in the range of $ 0.53-0.87 per pound. The market is confident that this trend will continue in the future. What is the maximum loss this trader can have? Another trader sells one November copper futures contract. What is the maximum loss this short trader can have?
A trader enters into two short cotton futures contracts when the futures price is 80 cents per pound. The contract is for the delivery of 50,000 pounds. How much does the trader gain or lose if the cotton price at the end of the contract is (a) 77.20 cents per pound; (b) 82.30 cents per pound? a. If the cotton price at the end of the contract is 77.20 cents per pound, the gain/loss for the trader with the short position is: $____________ b. If the cotton price at the end of the contract is 82.30 cents per pound, the gain/loss for the trader with the short position is: $_____________ Only typed answer and give fast

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