清华大学：《期权、期货衍生产品》（英文版） Chapter2 FuturesandForwardMarkets

2 Futures and Forward markets Summary Contract Specifications a Margin accounts Pattern of futures prices Charles cao

1 Charles Cao 2. Futures and Forward Markets ◼ Summary ◼ Contract Specifications ◼ Margin Accounts ◼ Pattern of Futures Prices

Contract specifications The asset a The contract size Delivery arrangement Delivery month a Price quotes Position limit (1000, 300 Charles cao 2

2 Charles Cao Contract Specifications ◼ The asset ◼ The contract size ◼ Delivery arrangement ◼ Delivery month ◼ Price quotes ◼ Position limit (1000, 300)

Corn Futures Trading Unit 5,000bu Deliverable Grades No. 2 Yellow at par and substitutions at differentials established by the exchange Price Quote Cents and quarter-cents/bu Tick Size 1/4 cent/bu ($12.50 /contract) Daily price Limit 12 cent/bu($600 /contract)above or below the previous day s settlement price (expandable to 18 cent/bu) Contract Months DeC, Mar, May, Jul, Sep Ticker Symbol C Charles cao 3

Trading Unit 5,000 bu Deliverable Grades No. 2 Yellow at par and substitutions at differentials established by the exchange Price Quote Cents and quarter-cents/bu Tick Size 1/4 cent/bu ($12.50/contract) Daily Price Limit 12 cent/bu ($600/contract) above or below the previous day’s settlement price (expandable to 18 cent/bu) Contract Months Dec, Mar, May, Jul, Sep Ticker Symbol C Corn Futures Charles Cao 3

Contract specifications Closing out positions Enter into a contract that is the opposite of the original contract a An example March 6, long one July corn futures contract April 12, short one July corn futures contract Charles cao

4 Charles Cao Contract Specifications ◼ Closing out positions ◼ Enter into a contract that is the opposite of the original contract ◼ An example: ◼ March 6, long one July corn futures contract ◼ April 12, short one July corn futures contract

Contract specifications Closing out positions(cont,) Majority of the futures contracts do not lead to delivery Your gain or loss is determined by the change in the futures prices between March 6 and april 12 Charles cao

5 Charles Cao Contract Specifications ◼ Closing out positions (cont.) ◼ Majority of the futures contracts do not lead to delivery ◼ Your gain or loss is determined by the change in the futures prices between March 6 and April 12

Margin Accounts Marking to markets At the end of each day, the margin account is adjusted to reflect the investor's gain or loss a Maintenance margin An example: Charles cao

6 Charles Cao Margin Accounts ◼ Marking to markets ◼ At the end of each day, the margin account is adjusted to reflect the investor’s gain or loss ◼ Maintenance margin ◼ An example:

Operation of Margins for a Long position n Two gold futures contracts a The contract size is 100 ounces The price of gold futures is $400 per pounce a The initial margin requirement is 5% The initial margin is $2, 000 per contract or $4,000 in total The maintenance margin is $1, 500 per contract or $3,000 in total Charles cao

7 Charles Cao Operation of Margins for a Long Position in Two Gold Futures Contracts ◼ The contract size is 100 ounces ◼ The price of gold futures is $400 per pounce ◼ The initial margin requirement is 5% ◼ The initial margin is $2,000 per contract or $4,000 in total ◼ The maintenance margin is $1,500 per contract or $3,000 in total

Day Futures Daily Gain Cumulative Margin Account Margin Price (Loss) Gain(Loss) Balance (dollars)(dollars)(dollars) (dollars) (dollars) 400.00 4.000 June 1 397.00(600) (600 3,400 June2396.10(180) 780) 3,220 June 3 398.20 420 (360) 3,640 une439710(22 (580 3420 June 5 396.70 80) (660) 3,340 une839540(260) (920) 3,080 Jme939330(0 (1,340) 2.660 1,340 June10393.60 60 (1,280) 4.060 June1139180(360) (1,640) 3,700 June1239270 180 (1460) 3,880 June15387:00(1,140) (2,600) 2,740 1,260 June16387.00 0 (2,600) 4,000 June17388.10 220 (2,380) 4,220 Charles cao

Day Futures Price (dollars) Daily Gain (Loss) (dollars) Cumulative Gain (Loss) (dollars) Margin Account Balance (dollars) Margin Call (dollars) 400.00 4,000 June 1 397.00 (600) (600) 3,400 June 2 396.10 (180) (780) 3,220 June 3 398.20 420 (360) 3,640 June 4 397.10 (220) (580) 3,420 June 5 396.70 (80) (660) 3,340 June 8 395.40 (260) (920) 3,080 June 9 393.30 (420) (1,340) 2,660 1,340 June 10 393.60 60 (1,280) 4,060 June 11 391.80 (360) (1,640) 3,700 June 12 392.70 180 (1,460) 3,880 June 15 387.00 (1,140) (2,600) 2,740 1,260 June 16 387.00 0 (2,600) 4,000 June 17 388.10 220 (2,380) 4,220 Charles Cao 8

Price quotes Price quotes Opening price, the highest price, the lowest price a settlement price Open interest: aggregated long positions Charles cao

9 Charles Cao Price Quotes ◼ Price quotes ◼ Opening price, the highest price, the lowest price ◼ Settlement price ◼ Open interest: aggregated long positions

Crude oil futures Open High LOW Settle Dec 32.3732.3731.5331.37 Jan 318331.8331.1131.27 Source: Wall Street Journal Charles cao

Crude Oil Futures Charles Cao 10 Open High Low Settle Dec 32.37 32.37 31.53 31.37 Jan 31.83 31.83 31.11 31.27 Source: Wall Street Journal