Reading 70: Futures Markets and Contracts-LOS d 习题精选 2011, previous, interpret, following, statements

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Session 17: Derivatives
Reading 70: Futures Markets and Contracts

LOS d: Describe price limits and the process of marking to market, and calculate and interpret the margin balance, given the previous day's balance and the change in the futures price.

 

 

Which of the following statements regarding the mark to market of a futures account is least accurate? Marking to market of a futures account:

A) may result in a margin balance above the initial margin amount.

B) may be done more often than daily.

C) is only done when the settlement price is below the maintenance price.

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Futures accounts are marked to market daily based on the new settlement price, which can result in either an addition to or subtraction from the previous margin balance. Under extraordinary circumstances (volatility) the mark to market can be required more frequently. Once the margin is marked to market, the contract is effectively a futures contract at the new settlement price.

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The practice of adjusting the margin balance in a futures account for the daily change in the futures price is called:

A) marking to market.

B) settling up.

C) a margin call.

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Marking to market is the practice of adding to or subtracting from the margin balance to adjust for the daily change in the contract value.

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A futures account is marked to market:

A) only when margin falls below the maintenance margin level.

B) weekly.

C) daily.

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Margin balances are marked to market (adjusted) daily based on the change in settlement price from the previous day.

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Which of the following statements best describes marking-to-market of a futures contract? At the:

A) conclusion of each trade, the gains or losses from all previous trades in the futures contract are tallied.

B) end of the day, the maintenance margin is increased for traders who lost and decreased for traders who gained.

C) end of the day, the gains or losses are tallied to the trader's account.

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Marking-to-market means that, at the end of the day, all gains or losses are tallied to the trader’s account.

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In commodity trading, the exchange removes any daily losses from a trader’s account and adds any gains to the trader’s account. This process is known as:

A) marking to market.

B) initial margin.

C) variation margin.

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To safeguard the clearinghouse, commodity exchanges require traders to settle their accounts on a daily basis. Marking to market is when any loss for the day is deducted from the trader’s account, and any gains are added to the account.

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A trader has a long position in a wheat contract.

• The initial margin is $5,000.
• The maintenance margin is $3,750.
• There are 5,000 bushels in each wheat contract.
• On July 10, the price is $2.00 per bushel.

What is the price at which the trader will receive a maintenance margin call?

A) $2.25.

B) $1.90.

C) $1.75.

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The trader would have to lose $1,250, or 5,000 ? 3,750 before they get a margin call. 5,000(2.00 ? P) = 1,250. P = $1.75.

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Faye Sagler takes a long position in 12 August yttrium futures contracts at a contract price of $3.50 per unit. Each contract is for 1,000 units of yttrium. The required initial margin is $400 per contract and the maintenance margin is $300 per contract. August yttrium futures decline to $3.42, $3.38, and $3.31 on the next three trading days. On the first day that Sagler will be required to deposit additional cash into her futures account, the required deposit is closest to:

A) $1,440.

B) $240.

C) $960.

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The initial margin is $400 × 12 = $4,800 and the maintenance margin level will be $300 × 12 = $3,600. Each $0.01 change in the price of yttrium changes the value of the account by $0.01 × 1,000 × 12 = $120.

Day	Price	Daily Change	Gain/Loss	Balance
0	$3.50			$4,800 (initial margin)
1	$3.42	-$0.08	-$960	$3,840
2	$3.38	-$0.04	-$480	$3,360
3	$3.31	-$0.07	-$840	$2,520

At the end of Day 2, the account balance has fallen below the maintenance margin level of $3,600, so Sagler must deposit enough cash to bring the balance back to the initial margin level of $4,800. The deposit is $4,800 - $3,360 = $1,440.

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A trader is long four July gold futures contracts, each with a contract size of 300 oz. If the price of July gold increases from $380.20 to $381.00 per ounce the change in the margin balance will be:

A) $960.

B) $240.

C) -$960.

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4 × 300 × (381 – 380.20) = $960

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An investor sold ten March stock index futures contracts. The multiplier on the contract is 250. At yesterday’s settlement price of 998.40 the margin balance in the account was computed as $86,450. Today the index future had a settlement price of 1000.20. The new margin amount is:

A) $90,950.

B) $81,950.

C) $86,900.

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86,450 ? 10 × 250 × (1000.2 ? 998.4) = $81,950

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An investor bought a futures contract covering 100,000 Mexican Pesos at 0.08196 and deposited margin of $320. The following day the contract settlement price was 0.08201. The new margin balance in the account is:

A) $320.

B) $314.

C) $325.

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320 + 100,000(0.08201 ? 0.08196) = $325