Speculation with a futures contract Before any trading, George begins with a margin account balance of $0. On May 1, George believes that silver will appreciate in the next 4 days. On May 1, George takes a long position in a futures contract for silver with a futures price of $10/ounce. Each contract is for 1000 ounces of silver. The initial margin is $3000 and the maintenance margin is $2500. On May 2, the settlement futures price is $9.80/ounce. On May 3, the settlement futures price is $9.10/ounce. On May 4, George offsets with a futures contract with a futures price of $9.40/ounce. Note that all contracts are for silver with delivery date of May 25. After George offsets on May 4, what is his margin account balance? Show how you calculate your answer.

Suppose that you bought two one-year gold futures contracts when the one-year futures price of gold was US$1,340.30 per troy ounce. You then closed the position at the end of the sixth trading day. The initial margin requirement is US$5,940 per contract, and the maintenance margin requirement is US$5,400 per contract. One contract is for 100 troy ounces of gold. The daily prices on the intervening trading days are shown in the following table. Day Settlement Price 0 1340.30 1 1345.50 2 1339.20 3 1330.60 4 1327.70 5 1337.70 6 1340.60   Assume that you deposit the initial margin and do not withdraw the excess on any given day. Whenever a margin call occurs on Day t, you would make a deposit to bring the balance up to meet the initial margin requirement at the start of trading on Day t+1, i.e., the next day.    b. Fill the appropriate numbers in the blank cells in the following table. (Hint: See solution to Q19 in Lesson 2 Learning…

Give typing answer with explanation and conclusion

act. The detalls of the contract are given below Date of contract 1 September 2015 Close out date (maturity 4 September 2015 date) Contract price Size of contract R975 per ounce 10 futures contract, each contract represents 100 troy ounces The initial margin Maintenance margin R12,000 per contract RI1,200 per contract Over the four trading days, the gold prices were as follows Date Spot price 1* September 2015 2nd September 2015 R964 R960 3rd September 2015 R970 4th September 2015 R980 Required 1. Explain whether Chill Ltd is buying or selling futures as a hedge. 2. Demonstrate the concept of marking to market using the 10 gold futures. Do that for the buyer and the seller. Clearly show the balance in the margin account at the end of each of the four trading days. 3. Under what circumstances is (a) a short hedge and (b) a long hedge appropriate?