Suppose that today (3/24/20) you simultaneously enter 2 positions, both with the S&P 500 index as the underlying asset and with maturities on 6/24/2020. The first is a long put with a strike of $2,300. The premium for 1 contract, which has a multiplier of 100 (i.e. it covers 100 shares), is $26,250. The second is a long future with a futures price per share of $2,366.40, a multiplier of 100, initial margin-per-contract of $25,000 and maintenance margin-per-contract of $20,000. On a margin call the account needs to be brought up to the maintenance margin only. Suppose you want the position to cover 700 shares each.

a.: How many of each contract do you open? How much cash do you need today to do so (remember that you have two types of contracts)?

b.

date	3/25	3/26	3/27
s&p spot	2351	2515	2257
s&p june spot	2380	2546	2285
account balance
maintence margin

Fill in the last two rows. The 3rd row should list the margin account balance at the end of each date after any margin call. If there is a margin call, assume you can pay it, and list the amount of the margin call in the final row.

c. Suppose you hold all of these contracts (futures and puts) until maturity, at which point the value of the S&P 500 is $2,450.81. What is the total profitfrom your strategy?

d. Assuming you hold to maturity, what is the breakeven point of your strategy? Hint: Calculate your total profit as you did in c. to make sure it’s actually zero!

e. What is the maximum loss of your strategy?

Answer rating: 100% (QA)

a Each contract consist of 100 shares I want to cover 700 shares So I need to open 700100 7 contracts each For Long put I have to pay a premium for ea... View the full answer