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Answer :
For the first scenario with gold futures contracts: Each gold futures contract represents 100 ounces.
Initial margin = $4,950 per contract.
Maintenance margin = $4,500 per contract.
Trader sells ten December futures contracts on gold at 1819.39.
The price below which $3,000 could be withdrawn is $1.50.
To determine the price below which $3,000 could be withdrawn, we need to calculate the equity in the margin account. The equity is the difference between the account balance and the maintenance margin requirement.
Equity = Account Balance - Maintenance Margin
Initially, the account balance is the initial margin requirement:
Account Balance = Initial Margin Requirement = $4,950 * 10 = $49,500
The equity is: Equity = $49,500 - $4,500 * 10 = $49,500 - $45,000 = $4,500
To withdraw $3,000 from the margin account, the equity should still exceed $4,500 - $3,000 = $1,500.
To find the corresponding price, we divide the equity by the number of contracts and the contract size:
Price = Equity / (Number of Contracts * Contract Size)
= $1,500 / (10 * 100)
= $1.50
Therefore, the price below which $3,000 could be withdrawn is $1.50.
For the second scenario with crude oil futures contracts:
Each crude oil futures contract represents 1,000 barrels.
Initial margin = $9,000 per contract.
Maintenance margin = $6,500 per contract.
Trader buys five July futures contracts on crude oil.
Current futures price = $20.9 per barrel.
To determine the price above which $5,000 could be withdrawn, we follow a similar process as above.
Account Balance = Initial Margin Requirement = $9,000 * 5 = $45,000
Equity = Account Balance - Maintenance Margin
= $45,000 - $6,500 * 5 = $45,000 - $32,500 = $12,500
To withdraw $5,000 from the margin account, the equity should still exceed $5,000.
Price = Equity / (Number of Contracts * Contract Size)
= $5,000 / (5 * 1,000)
= $1.00
Therefore, the price above which $5,000 could be withdrawn is $1.00.
For the third scenario with crude oil futures contracts:
Each crude oil futures contract represents 1,000 barrels.
Initial margin = $9,000 per contract.
Maintenance margin = $6,500 per contract.
Current futures price = $97.7 per barrel.
To determine the price below which a margin call will be triggered, we calculate the equity based on the maintenance margin requirement.
Account Balance = Initial Margin Requirement = $9,000 * 5 = $45,000
Equity = Account Balance - Maintenance Margin
= $45,000 - $6,500 * 5 = $45,000 - $32,500 = $12,500
The equity must be greater than or equal to zero to avoid a margin call.
To find the corresponding price, we divide the equity by the number of contracts and the contract size:
Price = Equity / (Number of Contracts * Contract Size)
= $12,500 / (5 * 1,000)
= $2.50
Therefore, the price below which a margin call will be triggered is $2.50.
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