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10. Suppose that you have opened a futures account and put up $20,000 for the margin. On September 2, 2006 (one of the good days),
10. Suppose that you have opened a futures account and put up $20,000 for the margin. On September 2, 2006 (one of the good days), you bought one (in a long position) September S&P 500 futures contract at the closing price of 1,320.20 in anticipation of perhaps a good unemployment report tomorrow. For the next two trading days, the (closing) prices went up to 1,362.50 and 1,363.80, respectively. The contract size for S&P 500 futures is 250. a) How much money do you have in your margin account at the end of each of the two days (ignoring the interest your money may earn)? b) If you sell one (in a short position) S&P 500 futures contract on the next trading day at the market closing price of 1,362.50, what obligations do you have down the road? Have you made money or lost money? Is this for sure? c) Suppose you hold your position and sell one S&P 500 futures contract some days later (before expiration) at an even higher price, say 1,420.20, what is your profit in the futures trading? d) Suppose you, as a long-term speculator, bought one December S&P 500 futures contract at 1,320.20. Assume further that you predict S&P 500 index will go up to 1,720.20 by the December expiration time (year-end rally, as known on Wall Street). If the futures price gradually rises and you sell your contract at 1,720.20, what is your profit? e) Suppose you are right that the S&P 500 futures price will be 1,720.20 by the December expiration time. However, October is known as the crash month. If the stock market just drops 10% in October and the S&P 500 futures price drops to 1,188.20, what is your "profit at this time? 10. Suppose that you have opened a futures account and put up $20,000 for the margin. On September 2, 2006 (one of the good days), you bought one (in a long position) September S&P 500 futures contract at the closing price of 1,320.20 in anticipation of perhaps a good unemployment report tomorrow. For the next two trading days, the (closing) prices went up to 1,362.50 and 1,363.80, respectively. The contract size for S&P 500 futures is 250. a) How much money do you have in your margin account at the end of each of the two days (ignoring the interest your money may earn)? b) If you sell one (in a short position) S&P 500 futures contract on the next trading day at the market closing price of 1,362.50, what obligations do you have down the road? Have you made money or lost money? Is this for sure? c) Suppose you hold your position and sell one S&P 500 futures contract some days later (before expiration) at an even higher price, say 1,420.20, what is your profit in the futures trading? d) Suppose you, as a long-term speculator, bought one December S&P 500 futures contract at 1,320.20. Assume further that you predict S&P 500 index will go up to 1,720.20 by the December expiration time (year-end rally, as known on Wall Street). If the futures price gradually rises and you sell your contract at 1,720.20, what is your profit? e) Suppose you are right that the S&P 500 futures price will be 1,720.20 by the December expiration time. However, October is known as the crash month. If the stock market just drops 10% in October and the S&P 500 futures price drops to 1,188.20, what is your "profit at this time
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