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  • 3 Margin Call

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    Tapas Ray
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    margin call

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    margin call

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    © All Rights Reserved
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    16 просмотров6 страниц

    3 Margin Call

    Загружено:

    Tapas Ray
    margin call

    Авторское право:

    © All Rights Reserved
    Скачайте в формате PDF, TXT или читайте онлайн в Scribd
    Отметить как неприемлемый контент
    из 6

    Mechanics of Futures Market

    EduPristine For FMP-I (Confidential)


    Mechanics of future markets

    Investor Broker Trader Exchange

    Clearing House Member Clearing House

     Specifications of a Contract  Margins  Clearing House Margin


    Asset: If asset is a commodity, Margin account.: investor If not the broker a clearing
    exchange specifies the asset in deposits a certain amount of house member has to be a
    complete detail: grade, quality, money with the broker in the member of the clearing house
    size, shape, color, etc. margin account Clearing margin : Just like a
    Contract size: The amount of the Initial margin: the initial amount margin account with a broker,
    asset to be delivered deposited in the margin account members have an account with
    Delivery arrangement: Maintenance margin: Is the clearing house
    place of delivery somewhat below the initial No maintenance margin
    Delivery month margin. The minimum amount Account balance to be
    after which a margin call is sent maintained at all times =
    to the investor. After margin call number of contracts *
    investor has to top his margin original margin
    account to the initial margin

    EduPristine For FMP-I (Confidential) 1


    Question: Margin Calculation (Important)
    1. An investor bought 1000 shares of ABC company each priced at $50. The initial margin requirement
    were 60%.and the maintenance margin requirement is 25%. At what price would the investor be
    getting a margin call?

    EduPristine For FMP-I (Confidential) 2


    Solution
     Total investment = 1000x 50 = 50,000
     Initial Margin = 60% x 50,000 = 30,000
     Maintenance margin = 25% x 50,000 = 12,500

     The investor gets a call when he/she loses 30,000 12,500 = 17,500
     Price of share after this loss = 50 17.5 = $32.50
     Hence the investor will get the margin call when the price falls to $32.50

    EduPristine For FMP-I (Confidential) 3


    Question: Margin Calculation (Important)
    1. What would be the variation margin if the stock price reduced to $10 from $50?

    EduPristine For FMP-I (Confidential) 4


    Solution
     When stock goes down to $10, the loss = 1000 x (50 10) = 40,000
     Hence margin account becomes 30,000 40,000 = -10,000
     Hence the investor will need to pay [(30,000 (-10,000)] = 40,000 as variation margin

    EduPristine For FMP-I (Confidential) 5

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