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Determine the trader total gains or losses

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Reference no: EM132601627

Q1a. Should the trader go long or short futures.

A trader takes a view that March KLSE CI futures which are currently trading at 1158.60 are about to enter a downtrend.

b. Assuming the trader maintains their original position until expiry and the cash settlement price is 1125.40, what will be the profit/loss?. The contract size is RM50/contract.

Q2 Assume it is now January 1996 and the KLSE composite index is at 1146. The risk-free interest rate is 5% p.a. The weighted average dividend yield of the KLSE composite index is 2.3% p.a. What would be the fair value of the June 2020 KLSE CI futures contract? Maturity is 6 months.

Two answer are required. First, assume that the interest is continuous compounding and the second, interest rate is assume non-continuous compounding ( i.e. simple interest).

Q3 Assume an investor takes a long position in 2 September KLSE CI futures contract on 17th July. The futures contract price is RM1613.00 The initial margin and maintenance margin are RM6,000/contract and RM4,000.00/contract respectively. The trader closes his position on the fifth day. The futures settlement prices during those five days are:

Day 1 RM1611.00

Day 2 RM1615.00

Day 3 RM1620.00

Day 4 RM1610.00a

Day 5 RM1608.00

The contract size is RM50/contract.

a. Determine the trader's total gains or losses.

b. How much does the trader pay (if any) for "margin call"?

Reference no: EM132601627

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