You are long 14 gold futures contracts, established at an initial settle price o

Question

You are long 14 gold futures contracts, established at an initial settle price of $1,494 per ounce, where each contract represents 100 troy ounces. Your initial margin to establish the position is $12,000 per contract, and the maintenance margin is $11,200 per contract. Over the subsequent four trading days, gold settles at $1,483, $1,479, $1,489, and $1,499, respectively.

Compute the balance in your margin account at the end of each of the four trading days, and compute your total profit or loss at the end of the trading period. Assume that a margin call requires you to fund your account back to the initial margin requirement. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Omit the "$" sign in your response.)

You are long 14 gold futures contracts, established at an initial settle price of $1,494 per ounce, where each contract represents 100 troy ounces. Your initial margin to establish the position is $12,000 per contract, and the maintenance margin is $11,200 per contract. Over the subsequent four trading days, gold settles at $1,483, $1,479, $1,489, and $1,499, respectively.

Explanation / Answer

14 contracts of 100 troy ounce 1 troy ounce = 1.09714 ounce 1400 troy ounce = 1536 ounce Per Contract Total Initial Margin $12,000 $168,000 Maintenance Margin $11,200 $156,800 Call for Margin Money Happens when account balance drops below Maintenance Margin and call is made for amount equal to initial magin account balance Day 1 Price Fall = $1494 - $1483 = $11 per ounce Loss Incurred = $11 * 1536 $16,896.00 Balance in Margin Account = $168000 - $16896 $151,104.00 Margin Call = $168000 - $151104 $16,896.00 Day 2 Price Fall = $1483 - $1479 = $4 per ounce Loss Incurred = $4 * 1536 $6,144.00 Balance in Margin Account = $16800 - $6144 $161,856.00 Margin Call - As not below Maintenance Margin $0.00 Day 3 Price Rise = $1489 - $1479 = $10 per ounce Profit = $10 * 1536 $15,360.00 Balance in Margin Account = $168000 + $15360 $183,360.00 Margin Call $0.00 Day 4 Price Rise = $1499 - $1489 = $10 per ounce Profit = $10 * 1536 $15,360.00 Balance in Margin Account = $183360 + $15360 $198,720.00 Margin Call $0.00 Total Profit = 15360 + 15360 - 6144 - 16896 $7,680.00

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