Ch02 - Mechanics of Futures Markets Chapter 2 Click to edit...

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Click to edit Master subtitle style  7/7/11  Options, Futures, and Other Derivatives, 7th  Mechanics of Futures Markets Chapter 2 11
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 7/7/11 Futures Contracts Available on a wide range of assets Exchange traded Specifications need to be defined: What can be delivered, Where it can be delivered, & When it can be delivered Settled daily 22
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 7/7/11 Margins A margin is cash or marketable securities deposited by an investor with his or her broker The balance in the margin account is adjusted to reflect daily settlement Margins minimize the possibility of a loss through a default on a contract 33
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 7/7/11 Example of a Futures Trade (page 26-28) An investor takes a long position in 2 December gold futures contracts on June 5 contract size is 100 oz. futures price is US$600 margin requirement is US$2,000/contract (US$4,000 in total) maintenance margin is US$1,500/contract (US$3,000 in total) 44
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 7/7/11 A Possible Outcome Table 2.1, Page 28 55 Daily Cumulative Margin Futures Gain Gain Account Margin Price (Loss) (Loss) Balance Call Day (US$) (US$) (US$) (US$)
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Ch02 - Mechanics of Futures Markets Chapter 2 Click to edit...

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