Question

QUESTION 39 Problem 3a (5 pts.) An investor buys 2 Silver contracts (long position) on the Chicago Board of Trade (CBOT) on May 7 for delivery in July that same year. The following information relates to the silver contract and silver prices on the date of purchase. • Current futures contract price: $15.00 per oz. • Size of contract: 5000 oz. • Initial margin requirement: 5% of initial contract value • Maintenance margin level: 3.5% of initial contract value 3A. How much must the investor put down as initial margin (in dollars $) to take the position in the 2 silver contracts? Show all work. Highlight in bold your answer. (5 pts.)

Answer 1

Calculation of Initial Margin:

Current contract price = $15 per oz.

Size of Contact = 5000 oz.

Cost of each Contrat = $75000(5000*$15)

Number of Contacts = 2

Cost of 2 Contacts = $150000($75000*2)

Initial margin requirement = 5% of Contact Value

= 5% of $150000

= $7500

Therefore the investor must put down $7500 as initial margin to take the position in the 2 silver contracts.