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As a speculative trader you are interested in the performance of the KLIBOR market. The last few months you observed the market had a bearish
As a speculative trader you are interested in the performance of the KLIBOR market. The last few months you observed the market had a bearish pattern. However, today you believe that the index performance will increasing in the near future. Assuming you are required to pay initial margin of RM8000/contract and maintain 85% of it, commission is charged at RM105/contract. The table below is the settlement index prices for the following trading days:
Day | Today | 1 | 2 | 3 | 4 |
Implied rate | 9.90 | 10.15 | 9.80 | 9.65 | 9.72 |
Required:
- Determine the contract value, initial margin and maintenance margin.
- Prepare a complete marked-to-market position based on the above information.
- If the trader decides to close-out his position on day 5 at RM995, calculate his realised profit or loss.
- Conclude the result from the above strategy.
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