Semi-pro speculator of CPO futures

Semi-pro speculator of CPO futures

As a semi-pro speculator of CPO futures, you asked your broker to short 8 lots of Futures Crude Palm Oil (FCPO) at RM2500 in BMDB. You are required to pay margin 10% of the value of your contract and to maintain 70% of the initial margin.

Day Settlement Price

1 RM2480

2 RM2530

3 RM2590

4 RM2540

5 RM2530

6 RM2010

On the basis of the settlement prices of CPO futures above, you are required to calculate the following:

i)          Value of CPO contracts

ii)        Initial and maintenance margin

iii)       Is there any margin call? Why?

iv)       Leverage effect in day 3

v)         Floating profit and loss in day 6. Assume commission charge at RM100 per contract.

A speculator long 10 April Crude Palm Oi futures (FCPO) contract for RM3,220 per metric tonne (MT). Suppose that over the next five days, the futures price evolved as follows:

 

Day Settlement Price

1 RM3305

2 RM3388

3 RM3265

4 RM3110

5 RM3345

On the fifth day, the trader decides to liquidate his position at RM3345 per MT.

Required:

i.           Calculate the contract value of the CPO futures contract.

ii.         If the initial margin is 10% of contract value and the maintenance margin is 75%, show the margin balance of the trader’s account.

iii.        Find the total profit or loss that the trader makes from such speculative trading if the commission charge is RM100 per contract.

 

iv.        Is there any margin call? If yes, by how much?