1. The Swiss franc (SF) futures contract has the following specifications Contra
ID: 2812267 • Letter: 1
Question
1. The Swiss franc (SF) futures contract has the following specifications Contract Size -SF125,000 Initial Margin - $3,600 Maintenance Margin $2,700 (a) (5 points) For each trading day in the table below calculate: (1) daily settlement, (2) margin account balance, and (3) variation margin for a single contract. Do this for both a long position and a short position. Do not withdraw excess funds from the margin account Day SF Futures Daily Margin Acct Variation Daily Margin Acct Variation Price Settlement Balance (Long) MarginSettlement Balance (Long) Margin (Short) (Short) (Long) (Short) Monday $0.9692 Monday $0.9612 Tuesday$0.9724 Wednesday $0.9804 Thursday$0.9732 Open Close Close Close Close (b) (5 points) What is the gain/loss for the long and short positions?Explanation / Answer
Solution
When the margin account falls below the maintenance margin,should add extra funds to match margin account to initial margin.
Formulas we require for calculation are below
Daily Settlement for long : (closing -opening position) * contract size
Daily settlement for short : (opening - closing)*contract size
Margin account balance : Daily settlement (+/ -) previous day closing margin account. i.e
should add / subtract daily settlement to margin balance from initial margin.
Below table shows the calculation for Question a and b.
Day
SF futures price
Daily settlement (long)
Margin Acct balance (long)
Variation margin (long)
Daily settlement(short)
Margin Acct Balance(short)
Variation margin (short)
Monday( open)
0.9692
Nil
3600
3600
Monday(close)
0.9612
-1000
2600
1000
1000
4600
Tuesday (close)
0.9724
1400
5000
-1400
3200
Wednesday (close)
0.9804
1000
6000
-1000
2200
1400
Thursday (close)
0.9732
-900
5100
900
4500
Gain / Loss
500
-500
Day
SF futures price
Daily settlement (long)
Margin Acct balance (long)
Variation margin (long)
Daily settlement(short)
Margin Acct Balance(short)
Variation margin (short)
Monday( open)
0.9692
Nil
3600
3600
Monday(close)
0.9612
-1000
2600
1000
1000
4600
Tuesday (close)
0.9724
1400
5000
-1400
3200
Wednesday (close)
0.9804
1000
6000
-1000
2200
1400
Thursday (close)
0.9732
-900
5100
900
4500
Gain / Loss
500
-500
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