For this question, refer to the first tab, Price History, which lists a fictitious set of prices for Jan 21 oil futures during the month of September Recall that oil futures quotes are the per barrel price, and one futures contract is to buy or sell 1,000 barrels of oil The initial margin for a contract initiated on 9 1 is $6,000 The maintenance margin is 7 5 of current exposure On a margin call, you must bring your account back to the higher of your initial or your maintenance margin On September 25, you need to sell 100,000 barrels of oil You decide to hedge this risk by taking a futures position that you will close out after settlement on 9 25 Assume that on 9 25 you can sell the oil for the spot settlement price that day In order to hedge your oil exposure, should you take a long or short futures position Suppose you order 100 futures contracts of the type specified in part (a) Assume that you purchase them after close on 9 1 at the settlement price and close them out after settlement on 9 25 Make a list of the date and amount of all margin calls that occur over the month Assume that you can make all of the margin calls On the first day of the contract, you can calculate a threshold price, where if the futures price passes that threshold a margin call will be required What is that price This is trickier than you might think at first Assuming you can make all of your margin calls, what is the total profit or loss made from the futures contracts This is easier than you might think Suppose instead that after the payment of the initial margin, you did not have the liquidity to make margin calls Instead, the clearinghouse closes out the minimum number of contracts required to keep your account active How many contracts would you have at the end of the month This is probably the hardest part Based on the situation outlined in part (e), what is the profit or loss from the futures strategy The firm could have avoided losing the contracts by setting aside money for margin calls at initiation What is the minimum amount that would need to have been set aside, given this set of price movements, and what would be the de facto leverage of such a strategy By de facto leverage, I mean If the oil futures price were to change by 1 , by what percent would your investment change, using the amount calculated in part ( as your initial outlay What is the minimum amount that would need to be set aside to guarantee the ability to make margin calls for any set of price movements N 3 8 1 Date Spot Sep '21 Future 9 1 20 58 61 60 03 3 9 2 20 59 8 62 2 4 9 3 20 57 92 59 92 5 9 4 20 59 74 62 23 6 9 8 20 62 14 63 48 7 9 9 20 58 74 60 61 8 9 10 20 58 87 61 52 9 9 11 20 57 59 58 94 10 9 14 20 55 85 57 38 11 9 15 20 56 64 58 18 9 16 20 55 28 56 65 13 9 17 20 55 98 58 68 14 9 18 20 53 83 56 4 15 9 21 20 51 49 53 77 16 9 22 20 52 22 53 64 9 23 20 49 88 51 34 18 9 24 20 48 18 49 75 19 9 25 20 48 05 49 46 20 12 17 long long Long Short Order Type Limit Price Shares long limit 60 46 7600 long limit 63 73 6200 long limit 63 86 4200 long limit 63 86 1600 limit 64 69 4700 limit 65 55 1900 long limit 66 3 3300 long market n a 1000 market n a 1700 short limit 62 52 2300 short limit 64 05 7500 short limit 65 13 1100 short limit 68 96 3800 short market n a 2300 short market n a 500 long 9 23 20 9 8 20 6 29 81 49 2 Trader ID 73470 154857 226111 343311 436358 453227 538815 567545 809026 909339 9 1 20 (95) 98 54 119 (115) (100) 67 (118) 9 2 20 (20) 42 (54) (112) (99) 85 (30) 60 (29) 157 9 3 20 (62) (75) (10) (59) 100 (94) 37 47 (9) 125 9 4 20 (70) (50) (84) 47 (6) 64 49 (97) 4 92 9 9 9 20 80 (77) (38) (97) (16) (10) 9 (76) (20) 245 9 10 20 9 11 20 12 (78) 5 31 (1) (17) 90 103 (23) (66) (86) (67) 57 75 (43) (53) 44 (80) 9 14 20 9 15 20 107 (82) 33 (4) 3 91 (111) (14) (6) (44) 40 (91) 37 9 54 32 68 (149) 16 9 16 20 2 21 (88) 70 (7) 7 (25) (8) 99 (71) 16 9 17 20 9 18 20 9 21 20 (55) (4) (86) (72) 16 (95) 28 (9) 89 (1) (91) 111 (12) (6) (43) (58) 5 22 7 57 49 (87) 91 (8) 49 79 16 150 (142) 9 22 20 (14) (89) (1) 109 76 (54) 77 50 40 (194) 9 24 20 (66) (88) 111 79 (40) 110 (41) (80) 78 (49) (4) (4) 111 43 (39) (85) (100) 9 25 20 91 29 (61) 69 118 35 (16) 14 (101) (178) 20 (23) (27) 57 (165) 61 11 41 29 143 (26)

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For this question, refer to the first tab, Price History, which lists a fictitious set of prices for Jan 21 oil futures during the month

For this question, refer to the first tab, Price History, which lists a fictitious set of prices for Jan 21 oil futures during the month of September. Recall that oil futures quotes are the per-barrel price, and one futures contract is to buy or sell 1,000 barrels of oil. The initial margin for a contract initiated on 9/1 is $6,000. The maintenance margin is 7.5% of current exposure. On a margin call, you must bring your account back to the higher of your initial or your maintenance margin. On September 25, you need to sell 100,000 barrels of oil. You decide to hedge this risk by taking a futures position that you will close out after settlement on 9/25. Assume that on 9/25 you can sell the oil for the spot settlement price that day.

In order to hedge your oil exposure, should you take a long or short futures position?
Suppose you order 100 futures contracts of the type specified in part (a). Assume that you purchase them after close on 9/1 at the settlement price and close them out after settlement on 9/25. Make a list of the date and amount of all margin calls that occur over the month. Assume that you can make all of the margin calls.
On the first day of the contract, you can calculate a threshold price, where if the futures price passes that threshold a margin call will be required. What is that price? [This is trickier than you might think at first]
Assuming you can make all of your margin calls, what is the total profit or loss made from the futures contracts? [This is easier than you might think]
Suppose instead that after the payment of the initial margin, you did not have the liquidity to make margin calls. Instead, the clearinghouse closes out the minimum number of contracts required to keep your account active. How many contracts would you have at the end of the month? [This is probably the hardest part]
Based on the situation outlined in part (e), what is the profit or loss from the futures strategy?
The firm could have avoided losing the contracts by setting aside money for margin calls at initiation. What is the minimum amount that would need to have been set aside, given this set of price movements, and what would be the de facto leverage of such a strategy? [By de facto leverage, I mean: If the oil futures price were to change by 1%, by what percent would your investment change, using the amount calculated in part ( as your initial outlay]
What is the minimum amount that would need to be set aside to guarantee the ability to make margin calls for any set of price movements?

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N 3 8 1 Date Spot Sep '21 Future 9/1/20 58.61 60.03 3 9/2/20 59.8 62.2 4 9/3/20 57.92 59.92 5 9/4/20 59.74 62.23 6 9/8/20 62.14 63.48 7 9/9/20 58.74 60.61 8 9/10/20 58.87 61.52 9 9/11/20 57.59 58.94 10 9/14/20 55.85 57.38 11 9/15/20 56.64 58.18 9/16/20 55.28 56.65 13 9/17/20 55.98 58.68 14 9/18/20 53.83 56.4 15 9/21/20 51.49 53.77 16 9/22/20 52.22 53.64 9/23/20 49.88 51.34 18 9/24/20 48.18 49.75 19 9/25/20 48.05 49.46 20 12 17 long long Long/Short Order Type Limit Price Shares long limit 60.46 7600 long limit 63.73 6200 long limit 63.86 4200 long limit 63.86 1600 limit 64.69 4700 limit 65.55 1900 long limit 66.3 3300 long market n/a 1000 market n/a 1700 short limit 62.52 2300 short limit 64.05 7500 short limit 65.13 1100 short limit 68.96 3800 short market n/a 2300 short market n/a 500 long 9/23/20 9/8/20 6 29 81 49 2 Trader ID 73470 154857 226111 343311 436358 453227 538815 567545 809026 909339 9/1/20 (95) 98 54 119 (115) (100) 67 (118) 9/2/20 (20) 42 (54) (112) (99) 85 (30) 60 (29) 157 9/3/20 (62) (75) (10) (59) 100 (94) 37 47 (9) 125 9/4/20 (70) (50) (84) 47 (6) 64 49 (97) 4 92 9 9/9/20 80 (77) (38) (97) (16) (10) 9 (76) (20) 245 9/10/20 9/11/20 12 (78) 5 31 (1) (17) 90 103 (23) (66) (86) (67) 57 75 (43) (53) 44 (80) 9/14/20 9/15/20 107 (82) 33 (4) 3 91 (111) (14) (6) (44) 40 (91) 37 9 54 32 68 (149) 16 9/16/20 2 21 (88) 70 (7) 7 (25) (8) 99 (71) 16 9/17/20 9/18/20 9/21/20 (55) (4) (86) (72) 16 (95) 28 (9) 89 (1) (91) 111 (12) (6) (43) (58) 5 22 7 57 49 (87) 91 (8) 49 79 16 150 (142) 9/22/20 (14) (89) (1) 109 76 (54) 77 50 40 (194) 9/24/20 (66) (88) 111 79 (40) 110 (41) (80) 78 (49) (4) (4) 111 43 (39) (85) (100) 9/25/20 91 29 (61) 69 118 35 (16) 14 (101) (178) 20 (23) (27) 57 (165) 61 11 41 29 143 (26)