- This topic has 14 replies, 4 voices, and was last updated 4 years ago by
.
- Posts
What are the differences between the settlement prices in June 2015 and loss per contract of $0.0011 in Dec 2018?
the difference in settlement prices wasn’t divided by the tick size of the contract to get the loss in ticks. And then multiplied by the tick value.
You have not said which question you are referring to and so it is impossible for me to answer!
Sorry. It is the part c of the 2nd question from December 2018 and June 2015 question number 4 part b.
Although the 2015 question does not actually mention the word ‘ticks’, it has effectively used them in the same way as the 2018 question.
The 2018 question is dealing with exchange rate futures where 1 tick is 0.0001. The 2015 question is dealing with interest rate futures where 1 tick is 0.01 (the same as 1 basis point).
Hi Sir
thanks once again for your help.
Does the amount we gain or lose on the contract in the marked to market process depend on whether we have bought or sold futures to begin with? So if we have bought contracts to begin with and the settlement price goes down 1 day after we have bought them, we make a loss? and if we have sold futures, we make a gain or I assume nothing happens?No. It is not actually a loss or a gain. At the start of the futures contract we have to pay a deposit (the ‘margin’) regardless of whether we are buying or selling futures.
During the life of the future (until we close the deal) the price of the futures will be going up and down. If we are ‘losing’ on the future (even though the actual gain or loss doesn’t occur until the end of the deal), then the dealer will require us to increase our deposit. If we are gaining on the future then the dealer will usually allow us to reduce our deposit (although that depends on what we have agreed with the dealer).
At the end of the deal we get back the deposit, less any loss on the futures or plus any gain on the futures. For calculations in the exam we always ignore the deposit/margin unless the question specifically asks for it (as it has done on (from memory) only ever on two occasions).
Sir the difference in the opening price or closing price is a gain or loss depends on what?
The BPP qs retilon ( mock1) is calculating a loss on the increase of prices where as qs daikon is calculating a loss on the increase in prices.
if futures contracts are sold like in qs retilon and the price increase at the end of the day then what does this mean?
The gain or loss depends on how the prices of the futures have changed.
Whether an increase is a gain or loss depends on whether the futures deal started with buying futures (and selling later) or started with selling futures (and buying later).
I do explain all of this in my free lectures.
Sir Mock 1 qs Retilon its starting with selling futures right . I am a bit confused because in part a we are buying futures , however part b mention that we sold it yet just wanted to confirm.
There is no question called Retilon in the current edition of the BPP Revision Kit.
However it is a very old exam question and unless BPP have amended it, we buy futures on 20 April and sell the futures in 2 months time on 20 June.
Mock 1 of BPP qs 2. I am sorry I did not mention that it is from a mock exam.
You did say that it was from the mock exam, but it is not in mock 1 of the latest edition of the BPP Revision Kit (which is all I have).
However I have answered your question.
- The topic ‘Mark-to-market process’ is closed to new replies.