Instructions: Answer the following ten questions worth 4 points each in the space provided.

Use the following information for questions 1-2. Suppose that you went long one coffee futures contract at 140.60 a month ago. Each contract is for 37,500 pounds of coffee. Today the price fell by 6.50 cents and settled at 143.30. The initial margin requirement was $3,200 and the maintenance margin requirement is $1,700. You have not had a margin call for the contract.

1. Whats it going to take for you to have a margin call? That is, where does the futures price

have to be for you to have a margin call?

Answer: The futures price has to be above / below (circle one) _______________ cents

2. How much is in your margin account today after its marked-to-market?

Answer: Your margin account currently has a balance of $_______________

Use the following information for questions 3-6. Suppose that you shorted a June S&P 500 futures contract (250 x index) a month ago at 2948.80. Today it rose by 120.50 and settled at 2790.60. The initial margin requirement was $35,000 and the maintenance margin requirement is $20,000. You have not had a margin call for the contract.

3. Whats it going to take for you to have a margin call? That is, where does the futures price

have to be for you to have a margin call?

Answer: The futures price has to be above / below (circle one) ______________

4. Whats your profit or loss since you opened the contract?

Answer: Profit / Loss of $_____________

(Circle One)

5. What was your one-day profit or loss today?

Answer: Profit / Loss of $_____________

(Circle One)

6. Whats your margin balance at todays settle?

Answer: Your margin balance is currently $_______________

7. Suppose that someone purchased a May $75 put option on a stock for $150 while the stock

was selling for $79.75. Whats the gain or loss for the buyer of the put if the stock is

selling for $77 at maturity?

Answer: Its a gain / loss (circle one) of $____________

8. A stock has the following options quotes available that have one week until maturity.

Strike Call Put

$75 $13.00 $0.10

$80 $6.80 $0.15

$85 $4.10 $0.78

$90 $1.00 $2.75

$95 $0.15 $6.25

Given your knowledge of how options work, where must the stock price be?

1. Less than $75
2. Between $75 and $80
3. Between $80 and $85
4. Between $85 and $90
5. Between $90 and $95
6. Greater than $95

9. Complete the following table to create a Hamlin Spread on Boeing using these options: Buy

two May $120 puts for $390 each and write one May $130 put for $810. Boeing is currently

selling for $128.75.

Stock Cash Flow at Maturity____________

Price $120 Puts $130 Put Total Cash Flow Profit/Loss

105________________________________________________________________________

106

107

108

109

110________________________________________________________________________

111

112

113

114

115________________________________________________________________________

116

117

118

119

120________________________________________________________________________

121

122

123

124

125________________________________________________________________________

126

127

128

129

130________________________________________________________________________

131

132

10. What is the person with the Hamlin Spread hoping happens?

1. The stock crashes.
2. The stock is $110 at maturity
3. The stock is $115 at maturity
4. The stock is $120 at maturity
5. The stock is $125 at maturity
6. The stock is $130 at maturity

The stock is above $130 at maturity