(b) A trader buys one May2022 futures contracts on frozen orange juice. Each contract is for the delivery of 10,000 pounds. The current futures price ( as on March 29 2022) is 146 cents per pound, the $1500 per contract, and the maintenance margin is $1125 per contract. What price change would lead to a margin call? Imargin is

(b) A trader buys one May2022 futures contracts on frozen orange juice. Each contract is for the delivery of 10,000 pounds. The current futures price ( as on March 29 2022) is 146 cents per pound, the $1500 per contract, and the maintenance margin is $1125 per contract. What price change would lead to a margin call? Imargin is

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 sells two July futures contracts on frozen orange juice. Each contract is for the delivery of 20,000 pounds. The current futures price is 150 cents per pound, the initial margin is $5,000 per contract, and the maintenance margin is $3,000 per contract. What price change would lead to a margin call? Under what circumstances could $8,000 be withdrawn from the margin account?
On November 29, 2019 you bought one July 2020 maturity corn futures contract at a futures price of $3.90 per bushel. If the price of the corn in the market in July 2020 (on the maturity date) is $3.78, what is your profit/loss? The contract multiplier is 5000 bushel.
XYZ flour company is planning to buy wheat for the next year’s production. 10,000 bushels of wheat will be purchased each quarter, on the 15th of January, April, July, and October in 2022. It wants to lock the wheat price using a futures contract, and at the same time use a swap to prepare the expenditure. The spot price of wheat today (April 15, 2021) is $3.1 per bushel, and the company enters futures contracts today. The prevailing interest rate is 1.5%, compounded continuously. Recall that each futures contract is for 5000 bushels and assume no storage cost of wheat. (a) If the company uses a prepaid swap, what is the prepayment? (b) If the company uses a plain vanilla swap for the quarterly purchase next year, what is the fixed amount?
Suppose the current price for coffee for delivery in December is $1.3890 per pound. Each contract is for 37,500 pounds. Initial margin is $5000 and maintenance margin is 2700 on what day will long side get a margin call if over the next 5 days the futures price evolves as follows Day Futures Price 1. $1.4110 2. $1.4290 3. $1.3800 4. $1.3165 5. $1.3175
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 company enters into a short futures contract to sell 10,000 units of a commodity for $0.5 per unit. The initial margin is $5000 and the maintenance margin is $3000. When will there be a margin call? Question 1Answer a. As soon as the futures price exceeds $0.7 per unit. b. As soon as the futures price exceeds $0.8 per unit. c. As soon as the futures price exceeds $0.5 per unit. d. As soon as the futures price exceeds $0.6 per unit.
Suppose you buy a December futures contract on a hypothetical 10-year, 6% semiannualcoupon note with a settlement price today of 125-060. You post the initialmargin required for this transaction ($1,430 per $100,000 contract). What nominalannual yield to maturity is implied by the settlement price? If interest rates fall to2.4%, what return would you earn on one futures contract? If interest rates rose to3.2%, what is the return on one futures contract?
Assume that the price of December 2021 corn futures is $4.65/bushel in February and $4.50 in October. If spot cash price in October is $4.55, what is the farmer's total revenue? Assume he entered into 20 contracts. Each corn contract is 5000 bushels.
A trader bought two July futures contracts. Each contract is for the delivery of 1,000 barrels. The initial margin is $11,250 per contract and the maintenance margin is $9,000. Calculate the daily gain and loss and margin account balance from April 13, 2020 to April 15, 2020 and explain when the investor will receive a margin call and how much does he need to top up?
You are a futures trader on Lean Hog at Kantar, New York. You have the following information on Lean Hog. The standard deviation of monthly changes in the spot price of Lean Hog Futures is (in cents per pound) 5. The standard deviation of monthly changes in the futures price of Lean Hog Futures the closest contract is 8. The correlation between the futures price changes and the spot price changes is 0.8. It is now December 17, 2019. Your client, a pork producer, is committed to purchasing 400,000 pounds of lean hog on January 15. The producer wants to use February Lean Hog futures contracts to hedge its risk. Each contract is for the delivery of 40,000 pounds of cattle. a. What is the optimal hedge ratio? (sample answer: 0.45 or 45%) b. Should the pork producer take a long or short hedge? (sample answer: short or long) c. How many contracts of lean hog futures does your client need to take to hedge the risk? (sample answer: 6 contracts)
A company enters into a short futures contract to sell 25,000 units of a commodity for 70 cents per unit. The initial margin is $4,000 and the maintenance margin is $3,000. What is the futures price per unit above which there will be a margin call? O 76 cents O 66 cents 74 cents O 78 cents
June 2021 Mexican peso futures contract has a price of $0.05197 per MXN. You believe the spot price in June will be $0.05831 per MXN. MXN500,000 is the contract size of one MXN contract. Required: What speculative position would you enter into to attempt to profit from your beliefs? Calculate your anticipated profits, assuming you take a position in three contracts. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes?

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