Question

You are short 15 gasoline futures contracts, established at an initial settle price of $2.085 per gallon, where each contract represents 42,000 gallons. Your initial margin to establish the position is $7,425 per contract and the maintenance margin is $6,500 per contract. Over the subsequent four trading days, gasoline settles at $2.071, $2.099, $2.118, and $2.146, respectively Compute the balance in your margin account at the end of each of the four trading days, and compute your total profit or loss at the end of the trading period. Assume that a margin call requires you to fund your account back to the initial margin requirement. (Leave no cells blank - be certain to enter "O" wherever required. Input all amounts as positive values. The daily margin account value is after the margin call for that day.) Margin Account Days Total Profit/Loss Margin Call Day 1 Day 2 Day 3 Day 4 Total

Answer 1

Solution:

Number of Future Contracts	15
Per contract of	42000 gallons
Contract Price	$ 2.085 per gallon
Day 1 price	$ 2.071 per gallon
Day 2 price	$ 2.099 per gallon
Day 3 price	$ 2.118 per gallon
Day 4 price	$ 2.146 per gallon
Initial Margin	$ 7425 per contract
Maintainance Margin	$ 6500 per contract

From the above data,

Calculation of Total Initial Margin required = $ 7425per contract * 15 contracts = $ 111375

Profit/Loss at Day 1 = ($ 2.071 per gallon - $ 2.085 per gallon) * 42000 gallons * 15 contracts = - $ 8820 (Loss)

Profit/Loss at Day 2 = ($ 2.099 per gallon - $ 2.071 per gallon) * 42000 gallons * 15 contracts = $ 17640 Profit

Profit/Loss at Day 3 = ($ 2.118 per gallon - $ 2.099 per gallon) * 42000 gallons * 15 contracts = $ 11970 Profit

Profit/Loss at Day 4 = ($ 2.146 per gallon - $ 2.118 per gallon) * 42000 gallons * 15 contracts = $ 17640 Profit

TOTAL PROFIT / (LOSS) = $ 38430 profit

Day	Opening balance Margin A/c	Profit	Loss	Margin Call	Closing Balance Margin A/c
Day 1	$ 111375	0	$ 8820	$ 8820	$111375
Day 2	$ 111375	$ 17640	0	0	$ 129015
Day 3	$ 129015	$ 11970	0	0	$ 140985
Day 4	$ 140985	$ 17640	0	0	$ 158625

Hence the final balance at the end of Day 4 in margin account is $ 158625