Suppose that you are a speculator who trades three-month Eurodollar futures. On
ID: 2800086 • Letter: S
Question
Suppose that you are a speculator who trades three-month Eurodollar futures. On November 5, you sell two December three-month Eurodollar futures contracts at 96.81. The subsequent weekly quotes for the closing December Eurodollar futures price are as follows:
Date: 11/12 11/19 11/26 12/3
Price: 96.92 97.08 96.77 96.63
Calculate the weekly values in your margin account. The initial margin is $650 per contract and the maintenance margin is $400. Calculate your realized return for the entire period. Assume that you offset your futures position on December 3 at the price indicated.
Explanation / Answer
Date
Price
Weekly Gain (Loss)
Cumulative Gain (Loss)
Margin Account Balance Beginning
Margin Account Balance End
Margin Call
5-Nov
96.81
1300
12-Nov
96.92
-550
-550
1300
750
550
19-Nov
97.08
-800
-1350
1300
500
800
26-Nov
96.77
1550
200
1300
2850
3-Dec
96.63
700
900
2850
3550
Calculations:
Weekly Gain (Loss): (Previous Week Price –This Weeks Price)× 2×2500 (Contract Multiplier is2500)
Margin Account Balance End= Margin Account Balance Beginning+ Weekly Gain (Loss)
Note: We will only get a margin call when margin account balance falls below maintenance margin ($800). In that case we have to refill the margin account till Initial Margin ($ 1300). This happens on Nov 12 and Nov 19. So beginning of 19th and 26th Nov our margin account balance is $ 1300.
The realized return for the period is $ 900.
In terms of % realized return is on the money deposited:
900/( 1300+550+800)=900/2650=33.96%
Date
Price
Weekly Gain (Loss)
Cumulative Gain (Loss)
Margin Account Balance Beginning
Margin Account Balance End
Margin Call
5-Nov
96.81
1300
12-Nov
96.92
-550
-550
1300
750
550
19-Nov
97.08
-800
-1350
1300
500
800
26-Nov
96.77
1550
200
1300
2850
3-Dec
96.63
700
900
2850
3550
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