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25_2 FIN376 Formative Online Test 7

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Suppose there is a future contract on stocks “ABC”. An investor bought one future contract on stocks “ABC” with a settlement date of 4 months, with a price of $5.65. The evolution of the reference price for future contracts on stocks “ABC” since the purchase day (day N) and during the following 3 days was as follows:Knowing that each future contract on stocks “ABC” has as underlying asset 100 stocks “ABC”, and the initial margin and the maintenance margin are, respectively, $500 and $400, determine the financial movement following the price changes on those days regarding the future’s buyer and the future’s seller, by filling in the tables below:Buyer: [table] Day | Price | Initial amount | Result | Interim result | Deposit | Withdrawal | Final amount N | $5.65 | ------ | ------ | $0 | Blank 1 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | ------ | Blank 2 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 N | $5.70 | Blank 3 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 4 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 5 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 6 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 7 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 8 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 N+1 | $5.90 | Blank 9 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 10 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 11 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 12 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 13 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 14 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 N+2 | $4.80 | Blank 15 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 16 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 17 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 18 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 19 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 20 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 N+3 | $5.95 | Blank 21 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 22 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 23 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 24 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 25 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 26 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 [/table] Seller:[table] Day | Price | Initial amount | Result | Interim result | Deposit | Withdrawal | Final amount N | $5.65 | ------ | ------ | $0 | Blank 27 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | ------ | Blank 28 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 N | $5.70 | Blank 29 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 30 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 31 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 32 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 33 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 34 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 N+1 | $5.90 | Blank 35 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 36 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 37 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 38 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 39 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 40 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 N+2 | $4.80 | Blank 41 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 42 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 43 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 44 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 45 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 46 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 N+3 | $5.95 | Blank 47 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 48 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 49 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 | Blank 50 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 51 Question 2 $128$115$110$90$20$5$0-$5-$20-$110-$115-$150 | Blank 52 Question 2 $615$600$590$550$520$505$500$495$480$470$450$400$390$385$250 [/table]

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Step-by-Step Analysis
We start by clearly restating the scenario and what needs to be tracked for both the Buyer and the Seller. - Each futures contract on ABC has an underlying asset of 100 shares of ABC. - The investor buys one futures contract with a settlement date 4 months ahead at a price of 5.65 per share (the reference price at purchase day N is 5.70, which affects P&L as the price moves). - Initial margin (deposit) required is 500 and the maintenance margin is 400. This means the trader must maintain at least 400 in the margin account; if the balance falls below this, a margin call would be triggered (not specified here, but the concept is key). - We track, for each day, the change in the contract value due to the change in the reference price, and how this affects the buyer’s and the seller’s margin accounts. A long futures position gains when the reference price increases and loses when it decreases, relative to the purchase price. Option-by-option analysis approach (without presuming the exact listed options): - For any day ......Login to view full explanation

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