Assume the current spot price for crude oil is $64.05 per barrel and the futures price for crude oil is $64.10 per barrel. A futures contract is for 1000 barrels. On Monday, Matt buys one futures contract from Josh. Both Matt and Josh are speculators in this futures market, whose initial margin requirement is $7,000 and whose margin maintenance requirement is $5,500. For hedgers the initial margin requirement is the same as the margin maintenance requirement. Assume that Matt and Josh will always keep the minimum required amount in their margin accounts. Also, assume (artificially) that no marking to market is done on the expiration date of the contract.

(ALREADY SOLVED) 1. How much must Matt deposit in his margin account in order to buy this futures contract?

7000

(ALREADY SOLVED) 2. How much must Josh deposit in his margin account in order to sell this futures contract? On Tuesday, the spot price of oil is $63.50 per barrel and the price of the crude oil futures closes at $63.54 per barrel.

7000

(ALREADY SOLVED) 3. As a result of marking to market, how much will need to be transferred at the end of Tuesday from Matt to Josh through their brokers and clearing- house? (A negative amount means money needs to be transferred from Ben to Stacey.)

7560

(ALREADY SOLVED) 4. After the transfer in #3, how much will Matt transfer into his margin account? (If she has to transfer money out of her account, put in a negative amount. Also, remember that Matt wants to keep the minimum possible amount in her margin account.)

Matt does not need to transfer any additional amount into his margin account.

Everything below this line still needs to be solved:

5. After the transfer in #3, how much will Josh transfer into his margin account? (A negative answer means he transfers money out of his account.)

6. What will be Matt's margin account balance at the end of Tuesday?

7. What will be Josh's margin account balance at the end of Tuesday? On Wednesday, the spot price of oil is $63.94 and the price of the crude oil futures closes at $63.97 per barrel.

8. As a result of marking to market, how much will need to be transferred at the end of Wednesday from Matt to Josh through their brokers and clearinghouse? (A negative amount means money needs to be transferred from Ben to Stacey.)

9. After the transfer in #8, how much will Matt transfer into his margin account on Wednesday? (A negative answer means she transfers money out of her account.)

10. After the transfer in #8, how much will Josh transfer into his margin account on Wednesday? (A negative answer means he transfers money out of his account.)

11. What will be Matt's margin account balance at the end of Wednesday?

12. What will be Josh's margin account balance at the end of Wednesday? On Thursday, the spot price of oil is $64.65 and the price of crude oil futures closes at $64.67 per barrel.

13. As a result of marking to market, how much must Matt transfer to Josh at the end of Thursday through their brokers and clearinghouse? (A negative amount means money needs to be transferred from Ben to Stacey.)

14. After the transfer in #13, how much will Matt transfer into his margin account on Thursday? (A negative answer means she transfers money out of her account.)

15. After the transfer in #13, how much will Josh transfer into his margin account on Thursday? (A negative answer means he transfers money out of his account.)

16. What will be Matt's margin account balance at the end of Thursday?

17. What will be Josh's margin account balance at the end of Thursday? On Friday (which is expiration of this futures contract), the spot price of oil is $64.82 and the futures price of oil is $64.82. Assume neither Matt nor Josh reverse out of their futures contracts.

18. How much does Matt pay Ben for the 1000 barrels of oil?