An investor has bought 10 crude oil 3-month futures contracts. The size of each contract is...

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An investor has bought 10 crude oil 3-month futures contracts. The size of each contract is 500 barrels and its future price is £74 per barrel. The initial and maintenance margin per contract are £7,000 and £4,500 respectively. Using the futures' settlement prices in the table below, calculate the daily gains/losses on the futures position, the cumulative gains and losses and the required margin calls paid or withdrawals on each day. Assume that each margin call requires the margin account to reset at the maintenance margin levels. In addition, assume that the investor will withdraw any sum in excess of the initial margin levels. Day End of trading day 1 End of trading day 2 End of trading day 3 End of trading day 4 End of trading day 5 Futures price (£/Barrel) 75 79 2 76 73 82 An investor has bought 10 crude oil 3-month futures contracts. The size of each contract is 500 barrels and its future price is £74 per barrel. The initial and maintenance margin per contract are £7,000 and £4,500 respectively. Using the futures' settlement prices in the table below, calculate the daily gains/losses on the futures position, the cumulative gains and losses and the required margin calls paid or withdrawals on each day. Assume that each margin call requires the margin account to reset at the maintenance margin levels. In addition, assume that the investor will withdraw any sum in excess of the initial margin levels. Day End of trading day 1 End of trading day 2 End of trading day 3 End of trading day 4 End of trading day 5 Futures price (£/Barrel) 75 79 2 76 73 82

Answer rating: 100% (QA)

To calculate the gainslosses we need to determine the settlement price for each day and the change in price from the previous day We can then calculat... View the full answer