Question: Need help with whole question, at least need help in starting, thank you in advance! Derivatives futures trading FINA4351 HW 2. Due: W SEP 14

Need help with whole question, at least need help in starting, thank you in advance! Derivatives futures trading

FINA4351 HW 2. Due: W SEP 14 online p1/2 This HW has only one problem. p2/2 Again: the prices in the table are in cents per gallon. May contract June contract Marking to Margin account 1. On April 3, trader M, SHORTED two (2) gasoline futures for delivery month May Date (spot month) (non spot month) market Sum of money for the market price of cents67.85/gallon. Trade Settle Trade Settle Cash flow in dollars There are 42,000 gallons in one futures. in dollars price price price price The required initial and maintenance margins per gasoline futures are as follows: April Margin Spot month (May) Non-Spot month (June) 3 67.85 67.85 65.00 $6,000.00 Initial $3,000 $2,000 4 69.46 65.93 Maintenance $2,100 $1,100 Again: 5 There are 42,000 gallons in one contract. 66.43 63.93 Futures prices are given in cents/gallon. 6 64.55 62.46 7 64.95 62.89 2. Trader M held the short (2 May) futures position until April 12 without trading. 10 67.29 64.41 11 69.00 65.91 3. On April 12, M offset the (2 May) futures position at the settle price of cents70.11/gallon. Also on April 12, M deposited enough money to bring the 12 70.11 70.11 66.84 margin to $5,000. M did not withdraw the $5,000 from the margin account and 13 68.81 65.81 did not trade until April 18. 14 70.02 66.54 4. On April 18, M SHORTED four (4) June gasoline futures for cents69.33/gallon and deposited $3,000 in the margin account to satisfy the initial margin requirement 17 72.08 68.21 of (4)($2,000) = $8,000. (Recall that M kept $5,000 in the margin account.) 18 73.86 69.33 69.33 19 74.62 70.23 5. M did not trade on April 19 and April 20. 20 74.65 71.36 On April 21, M quit the market by offsetting the short (4 June futures) position 71.18 71.18 for the market price of cents71.18/gallon and withdrew the funds from the 21 74.16 margin account. 24 72.23 69.18 Fill in the numbers on the table below in the two right columns. 25 76.16 71.38 26 78.12 72.33 27 78.12 72.27 28 74.12 71.22

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