Question
Please show work! Assume the current spot price for crude oil is $66.65 per barrel and the futures price for crude oil is $66.70 per
Please show work!
Assume the current spot price for crude oil is $66.65 per barrel and the futures price for crude oil is $66.70 per barrel. A futures contract is for 1000 barrels. On Monday, Stacey buys one futures contract from Ben. Both Stacey and Ben are speculators in this futures market, whose initial margin requirement is $7,500 and whose margin maintenance requirement is $5,500. For hedgers the initial margin requirement is the same as the margin maintenance requirement. Assume that Stacey and Ben 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.
On Wednesday, the spot price of oil is $65.84 and the price of the crude oil futures closes at $65.87 per barrel.
8. As a result of marking to market, how much will need to be transferred at the end of Wednesday from Stacey to Ben 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 Stacey transfer into her margin account on Wednesday? (A negative answer means she transfers money out of her account.)
10. After the transfer in #8, how much will Ben transfer into his margin account on Wednesday? (A negative answer means he transfers money out of his account.)
11. What will be Stacey's margin account balance at the end of Wednesday?
12. What will be Ben's margin account balance at the end of Wednesday?
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