Long position on S&P futures contracts that pay $ times the index level.
Initial margin is set at of the contract value on Day
Maintenance margin is of the initial margin
tableDay Total multiplier,tableFutures priceEoDValue change
tableAddition tomarginMargin balance,
The contract above has x leverage because the nominal size of the contract is tentimes the size of the initial investment. This suggests that a change in the futures price will have a change in the value of the margin account.
a Does that match the change after the first day's settlement? Show your work.
b Discuss the implications for this amount of leverage for an investor in volatile markets.
