Question

Assume today's settlement price on a CME EUR futures contract is $1.3150/EUR. You have a short position in one contract. Your performance bond account currently has a balance of $1,600. The next three days' settlement prices are $1.3116, $1.3133, and $1.3044. Calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account after the third day. Assume a contract size is EUR 115,000.

Answer 1

The changes in the performance bond account from daily marking-to-market are calculated by multiplying the change in settlement price by the contract size. The balance of the performance bond account after the third day is $955.

Step-by-step explanation:

To calculate the changes in the performance bond account from daily marking-to-market, we need to determine the daily profit or loss. The profit or loss is calculated by multiplying the change in settlement price by the contract size.

For example, on the first day, the settlement price is $1.3116/EUR, which is a decrease of $0.0034/EUR from the previous day. The change in settlement price multiplied by the contract size of EUR 115,000 gives us a profit of $391. As a result, the balance of the performance bond account after the first day would be $1,991 ($1,600 + $391).

Following the same calculation method, the second day would result in a loss of $87 and a balance of $1,904. The third day would result in a loss of $949 and a balance of $955.