Today a trader enters into a long position in one July 2021 silver futures contract. The current futures price is $27.00 per ounce. The contract size is 5,000 ounce. The initial margin is $18,150 per contract and the maintenance margin is $16,500 per contract. (a) What price change of the July 2021 futures price would lead to a margin call? (b) Suppose the trader will close out her position on April 15, 2021, at a then prevailing July 2021 silver futures price of $27.50 per ounce. What would be her total profit or loss in this scenario?
Today a trader enters into a long position in one July 2021 silver futures contract. The current futures price is $27.00 per ounce. The contract size is 5,000 ounce. The initial margin is $18,150 per contract and the maintenance margin is $16,500 per contract. (a) What price change of the July 2021 futures price would lead to a margin call? (b) Suppose the trader will close out her position on April 15, 2021, at a then prevailing July 2021 silver futures price of $27.50 per ounce. What would be her total profit or loss in this scenario?
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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Transcribed Image Text:Today a trader enters into a long position in one July 2021 silver futures contract.
The current futures price is $27.00 per ounce. The contract size is 5,000 ounce. The initial
margin is $18,150 per contract and the maintenance margin is $16,500 per contract.
2.
(a) What price change of the July 2021 futures price would lead to a margin call?
(b) Suppose the trader will close out her position on April 15, 2021, at a then prevailing July
2021 silver futures price of $27.50 per ounce. What would be her total profit or loss in
this scenario?
Expert Solution
Step 1
Given,
Trader enters into a long position it means - Trader Bought july 2021 Silver futures contract
The current future price is $27 (Trader purchase price)
Contract size is 5000 ounce
Contract size nothing but in one lot 5000 ounce are present i.e 5000* 27 = 135000
Simply,
Today trader bought JUL Silver FUT(5000) at $135000
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