Gold trades at $1,350 per ounce. I take a long futures position with a notional value...
Gold trades at $1,350 per ounce. I take a long futures position with a notional value of 100 ounces of gold. In order to take the position, I need to deposit a margin amount of 20% of the total notional value of the trade. On the first day my position is open, gold drops to $1,290 per ounce. What is the balance in my margin account after the first day?
Homework Answers
Answer>
Total margin amount = 20% of the total notional value of the trade
That is,
Total margin = 20% * 100 * $1350 = $27000
On first day, price of gold = $1290 per ounce
Difference in price = $1290 - $1350 = -$60 per ounce
Hence total margin balance after first day = 27000 - 60*100 = 21000
Hence the balance in the margin account after the first day is $21,000
Hope this answers your question.
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