What will be the net gain or loss from the trades

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Suppose you go short three contracts of August HRC Steel futures today (Day 0) at a price of $1,725 per ton. The contract size is 20 tons per contract. You opened the position with minimum margin required of $1,600 per contract. The maintenance margin is $1,200 per contract. Transaction costs and taxes make no impact on your net position.

(a) If the settlement price of Day 0 is $1,750, what will be the margin account balance at the end of Day 0? Will you receive a margin call? How much will you need to deposit into the account if you received a margin call?

b) Suppose you decided to long five contracts of August HRC Steel Futures on the next day (Day 1) at the price of $1,760 per ton. If you closed all positions at a price of $1,795 per ton on the same day, what will be the net gain or loss from the trades done within these two days?

Reference no: EM132951335

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