Question
The investor takes a long position in two futures contracts for orange juice. Each contract amounts to 15000 units of the underlying. The current contract
The investor takes a long position in two futures contracts for orange juice. Each contract amounts to 15000 units of the underlying. The current contract price is 1.60 PLN / unit of the underlying. The initial margin is 6000 PLN per contract while the maintenance margin is 4500 PLN per contract. Both margins are constants! a) What price change of the contract will cause a margin call? b) Under what circumstances will the investor be able to withdraw 2000 PLN from the deposit account without closing the position? c) What should the price on the underlying (spot) market be so that the investor would have a profit at the time of exercising the contract? Explain shortly the role of margins.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started