Option #1: FuturesAn investor enters into a short futures position in 10 contracts in gold at a futures price of $276.50 per oz. The size of one futures contract is 100 oz. The initial margin per cont

Option #1: Futures

An investor enters into a short futures position in 10 contracts in gold at a futures price of $276.50 per oz. The size of one futures contract is 100 oz. The initial margin per contract is $1,500, and the maintenance margin is $1,100.
1. What is the initial size of the margin account?
2. Suppose the futures settlement price on the first day is $278.00 per oz. What is the new balance in the margin account? Does a margin call occur? If so, assume that the account is topped back to its original level.
3. The futures settlement price on the second day is $281.00 per oz. What is the new balance in the margin account? Does a margin call occur? If so, assume that the account is topped back to its original level.
4. On the third day, the investor closes out the short position at a futures price of $276.00. What is the final balance in his margin account?
5. Ignoring interest costs, what are his total gains or losses?
The current price of gold is $864 per troy ounce. Assume that you initiate a long position in 10 COMEX gold futures contracts at this price on 7-July-2016. The initial margin is 7% of the initial price of the futures, and the maintenance margin is 5% of the initial price. Assume the following evolution of gold prices over the next five days, and compute the margin account assuming that you meet all margin calls.

Date Price per Ounce

7-Jul-16$8648-Jul-16$8609-Jul-16$85810-Jul-16$85211-Jul-16$84212-Jul-16$840

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