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three month euro contracts 125000 contract size
successive daily prices on future mrkt you have sold areselling price 0.6916
day 1 0.6930initial margin are 1000 pound per contract .variation margin 100% of intial margin
examiner has given 0.6930-0.6916 =14 tick loss,14 *12.5 pound??
1)how did we get 12.5 pound??
2)what does it mean by mark to mark daily basis? what are we doing here exactly ??
It is mark to market (not mark to mark), and refers to the fact that the initial margin (deposit) is increased or decreased as the futures price goes up and down.
I explain about the margin in the lectures, and also explain about how the tick size is calculated. As the futures price changes by 1 tick (0.0001) then the profit or loss on one contract changed by $12.50 and so the margin has to be increased or is decreased by $12.50 for each contract.
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