It is July $2016.$ A mining company has just discovered a small deposit of gold. It will take six months to construct the mine. The gold will then be extracted on a more or less continuous basis for one year. Futures contracts on gold are available on the New York Mercantile Exchange. There are delivery months every two months from August $2016$ to December $2017.$ Each contract is for the delivery of $100$ ounces. Discuss how the mining company might use futures markets for hedging.

At the end of one day a clearing house member is long $100$ contracts, and the settlement price is $$50,000$ per contract. The original margin is $$2,000$ per contract. On the following day the member becomes responsible for clearing an additional $20$ long contracts, entered into at a price of $$51,000$ per contract. The settlement price at the end of this day is $$50,200.$ How much does the member have to add to its margin account with the exchange clearing house?

At the end of one day a clearing house member is long $100$ contracts, and the settlement price is $$50,000$ per contract. The original margin is $$2,000$ per contract. On the following day the member becomes responsible for clearing an additional $20$ long contracts, entered into at a price of $$51,000$ per contract. The settlement price at the end of this day is $$50,200.$ How much does the member have to add to its margin account with the exchange clearing house?