In January 2023, a trader takes a long position in ten May 2023 corn futures contracts. Each contract is for
In January 2023, a trader takes a long position in ten May 2023 corn futures contracts. Each contract is for 2000 bushels of corn and the current futures price is $6.50 per bushel, where reg is the last non-zero digit of your registration number.i) Assume that the initial margin is $3,100 per contract and the maintenance margin is $1,750 per contract. What value of the futures price in $ per bushel will result in a margin call?ii) Suppose that the trader decides to close out their position in March 2023. What will their total payoff be if the futures price at the time is $6.70 per bushel? iii) Explain why the payoff in (ii) above takes this form in the case of a long futures position.
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To answer these questions we need to calculate the margin call total payoff and explain the payoff f
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