1) Work maintenance account example in Purcell and Koontz, Chapter 1, Table 1.1, page 7. Do not use the margin requirements in the table. Use $1,200 for the initial margin and $800 for the maintenance margin. Your spreadsheet should look like the "Marking to Market" Handout. But it is recommended that you add a column for the quantity traded. (A) Assume you trade five contracts. Assume you enter each trade at the market close.

2) Work the maintenance account on a second spreadsheet page where you trade two contracts. You buy the first contract, as before and on the table, on July 2. Assume you buy the second contract at the close on July 3. Then assume you sell one contract back at the close on July 17 and, as in the table, sell the remaining contract on Sep 21. Again, assume you get out of the trade at the market closing price. This assumption will impact the quantity so be careful and think. Do you work on a single spreadsheet. The maintenance account dollars for all corn contracts are kept in a single account. In other words, do not split the contracts out separately in your spreadsheet. Use $1,200 per contract for the initial margin and $800 per contract for the maintenance margin. Also make the following assumptions. (A) Assume your broker makes you put up enough initial margin on the additional trades to cover the initial margin on all open contracts. (B) Assume you leave the money in your maintenance account after liquidating any of your long positions. You will not but (C) does it matter which contract you sell first? Offer proof and not just opinion. (Yes, FIFO will be used but, does it matter?)

Price Date ($ per bu.) Action Margin Action Balance ($) TABLE 1.1 Initial margin Accounting for Margins = $1,200 Maintenance margin = $800 and Margin Calls for a July 2 $3.50 Buy December corn Long Position in futures @ $3.50. $1,200 December Corn, July 3 3.46 1,000 50,000-Bushel Contract July 4 Holiday July 5 3.40 $500 call 1,200 July 6 3.33 850 July 9 3.28 $600 call 1,200 July 10 3.31 1,350 July 11 3.38 1,700 July 12 3.40 1,800 July 13 3.47 2,150 July 16 3.56 2,600 July 17 3.66 3,100 July 18 3.70 3,300 July 19 3.71 3,350 July 20 3.75 3,550 Sept. 21 $3.90 Sell December corn futures @ $3.90 $4,300In this example, the trader has $25,000 in the Futures Account with a broker. The trader wishes to trade one 5000-bushel soybean contract. The brokerage house has the following margins on soybean contracts. $3000/contract Initial Margin $2000/contract Maintenance Margin Maintenance Account Date | Action | Settlement | Daily Price | Daily Gain | Beginning Deposit End-of-Day Price Change or Loss of Day Balance Balance 7/11 | Sell 12.20 - - - $3000 $3000 7/12 - 12.02 -0.18 +900 $3000 - $3900 7/13 - 12.32 +0.30 -1500 $3900 - $2400 7/14 - 12.50 +0.18 -900 $2400 $1500 $3000 7/15 - 12.20 -0.30 +1500 $3000 - $4500 7/18 | Buy 12.10 -0.10 +500 $4500 - $5000 Commission on the Roundturn is $25. Meanwhile, back in the Futures Account: Beginning Balance (Prior to trade) $25,000 Initial Margin (7/11) -3,000 Margin Call (7/14) -1,500 From maintenance account after trade (7/18) +5,000 Commission (7/18) 25 Ending Balance (After offsetting the position) $25,475