A
Ayushi Arora
Member
Hi,
Can you help me with the following:
Q1: Can you please explain the working of futures market with a small numerical example covering every concept stated in core reading like initial margin, variation margin, price limits, Close out prior to delivery, normal delivery, and marking to market?
Q2: How the future trading process differs from options trading process with numerical example comparing the example used in Q1?
Q3: Can you please mention exhaustive list how Over the counter market place different from Exchange?
Q4: There is a practice question which asks to state maximum/ minimum profit from selling a future, In the solution following lines are mentioned -
"The maximum loss is unlimited. (Although note that if the seller owns the underlying asset, then the unlimited loss on the future will be matched by an unlimited profit from the underlying asset.)". Can you please explain these lines?
Q5: In the below practice question :
"An investor takes out a long position in five equity index futures, at 12 noon on 6thJanuary, when the futures price is 9,600. The index futures is traded on the basis of $10 per index point and the initial margin payment is set at 10% of the contract value of each future.
Complete the table below showing how the investor’s margin account balance will vary subsequently......"
The solution calculates initial margin as 5 contracts × 9,600 points per contract × $10 per point × 10%= $48,000
I am not clear where in the question it is mentioned that a futures contract has 9600 equity indexes, it simply mentions the price as 9600. Can you please explain this?
Can you help me with the following:
Q1: Can you please explain the working of futures market with a small numerical example covering every concept stated in core reading like initial margin, variation margin, price limits, Close out prior to delivery, normal delivery, and marking to market?
Q2: How the future trading process differs from options trading process with numerical example comparing the example used in Q1?
Q3: Can you please mention exhaustive list how Over the counter market place different from Exchange?
Q4: There is a practice question which asks to state maximum/ minimum profit from selling a future, In the solution following lines are mentioned -
"The maximum loss is unlimited. (Although note that if the seller owns the underlying asset, then the unlimited loss on the future will be matched by an unlimited profit from the underlying asset.)". Can you please explain these lines?
Q5: In the below practice question :
"An investor takes out a long position in five equity index futures, at 12 noon on 6thJanuary, when the futures price is 9,600. The index futures is traded on the basis of $10 per index point and the initial margin payment is set at 10% of the contract value of each future.
Complete the table below showing how the investor’s margin account balance will vary subsequently......"
The solution calculates initial margin as 5 contracts × 9,600 points per contract × $10 per point × 10%= $48,000
I am not clear where in the question it is mentioned that a futures contract has 9600 equity indexes, it simply mentions the price as 9600. Can you please explain this?