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Margin Account for a Futures Contract

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You are short the Swiss franc futures contract for five days. Assume that the initial margin is $2,000 and the maintenance is margin is $1,500. The contract is for 100,000 Swiss francs. The future price at which you enter the contract at noon on Monday is $0.55. The Monday settlement price is $0.56. The settlement prices for the next four days are $0.57, $0.60, $0.59, and $0.63. You close your position on Friday at the settlement price. Compute the settlement variation payment for each day of the week. Show how your margin account evolves through the week. Will you have any margin calls? If yes, for how much?

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Solution Summary

The operation of a margin account for a futures contract has been demonstrated.

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You are short the Swiss franc futures contract for five days.  Assume that the initial margin is $2,000 and the maintenance is margin is $1,500.  The contract is for 100,000 Swiss francs.  The futures price at which you enter the contract at noon on Monday is $0.55.  The Monday settlement price is $0.56.  The settlement prices for the next four days are $0.57, $0.60, $0.59, and $0.63.  You close your position on Friday at the settlement price.  Compute the settlement variation payment for each day of the week.  Show how your margin account evolves through the week.  Will you have any margin calls?  If yes, for how much?

Since, it is a short futures contract (sell underlying Swiss Franc), it gains when the price drops and loses when the price goes up.
The contract is marked to ...

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