Transaction Details ?

[illumintai 10]

Hi,

 

I just participated in an investment game. I am supposed to analyse the transactions and compile a report.

 

We are given $10,000,000 cash and margin spending doubles our buying power to $20,000,000.

 

Here is the transaction detail: -

 

Trade Date Order Sym Qty Price Paid* Comm. Amount

01/10/08 Buy BPH8.CME 650 122,006.2 25.00 -79,304,087.50

 

First off, this is a GBP-USD fx futures transaction. I cannot in the world understand how the amount paid can be around 80 mil ?

 

Look forward to your replies.

 

Thanks

[HAL9000 10]

 

Trade Date Order Sym Qty Price Paid* Comm. Amount

01/10/08 Buy BPH8.CME 650 122,006.2 25.00 -79,304,087.50

 

 

Hi illuminatai,

 

well first I'm not in currencies, so beware, but I will tell you my understanding and others will surely correct me if I'm wrong on it.

 

First of all, I think that CME is the exchange, so you don't traded via Forex,

instead you have bought a future; namely BP with expiry H8.

 

So your price paid, was 122k for 650 contracts.

You paid 25 $ commission. Don't know if this is realistic, but anyway.

 

Now the 79 mio. $ are the total value of contracts, but not what you have paid. I think that no futures trader thinks about this total value, because its not realistic, that the contract goes to zero, or that he waits so long until ... .

But if the underlying would go to zero, thats the amount you have to pay

to your broker.

 

Hopefully this doesn't make it complicated, all what I like to say is:

122k $ are somehow your marging. 79 mio. $ is the total value of contracts.

 

And now you should be able to calculate your leverage.

 

Hope it helps.

 

Hal

 

P.S.: Leverage is is key to make or loose :doh: more money than others in a shorter period of time.

Edited February 8, 2008 by HAL9000
Minor corrections and contracts vs. underlying.

[HAL9000 10]

Just some more,

 

it seems to me that you are new to business, but if not,

maybe it will help someone else:

 

BP = British Pound

H8 = March 2008

 

A CME future contract.

 

Maybe you start here, to get some more information:

 

Contract Listings

 

Let me know, if this has helped you, or if I can help you in an other way.

 

Anyway good luck, and remember, the key is not that you win the match, just learn.

Edited February 8, 2008 by HAL9000

[illumintai 10]

Thanks for your help,

 

Yes, its a CME futures contract. There is a 10% position limit, meaning we can only spend upto a million per trade. As such most futures contract I made were close to Million USD in margin payments. So I very much doubt it will be 122k for 650 contracts.

 

Look forward to more help please !

[HAL9000 10]

 

I very much doubt ...

 

 

You doubt?

 

You are (were?) in a contest (like every trader), then ask (i.e. ask the right questions)!

I see that you try to learn, to understand! (But you are in a contest, and maybe responses are unfair to others in it.)

 

I recalculated and 122k $ as margin would be OK for me.

 

If you tell me the leverage, I will tell you the multiplier, and what a multiplier is good for.

 

 

Regards,

 

Hal

 

 

P.S.: Something about Margin (finance) - Wikipedia, the free encyclopedia

Edited February 8, 2008 by HAL9000
P.S. added.

[illumintai 10]

Thank you,

 

This is the information currently available to me.

 

Ah, I forgot to mention you account was based on GBP and exchange rate at the time was 0.514 USD-GBP. The transaction detail i mentioned above is all in GBP too.

 

The competition is over and all securities liquidated.

 

-Account Balances-

Available Cash £12,580,029.86

Credit Balance £0.00

Loan Balance £0.00

Interest Earned £6,528.97

Interest Charged £0.00

Buying Power £8,209,511.93 (initially this was 20 mil)

Portfolio Value £12,580,029.86 (initially this was 10 mil)

 

-Market Data-

Market Value of Long £0.00

Market Value of Short 0.00

Margin Requirement £8,475,273.90

 

-Margin Requirements

 

The margin requirement for equity(I think it includes futures too) purchases and short sales is 50%. This means that for equity purchases you can borrow up to 50% of the total cost. For short sales, you must deposit an amount equal to 50% of the current market value of your short positions.

 

Thank you.

[HAL9000 10]

Anyway maybe I'm wrong,

 

will simulate on Monday regarding margin requirements.

 

Hal.

 

OK, lets assume that the total value is 79 mio. $.

Further assume that the max. overnight margin is 4 % of the total value,

so it would be ca. 3.2 mio $. This would make more sense.

 

The 122k $ are near to (a close of 1.94 $ per contract * multiplier (i.e. 62500)).

And 122k $ * 650 are nearly 79 mio. $.

 

So excuse my above statements :doh:. I've learned too on your question/call.

And I hope that this makes more sense to you .

 

Have a nice weekend,

 

Hal

[HAL9000 10]

Seems that we have written at the same time,

 

somehow I don't think that the 50% rule was for futures, but will think about it.

 

But, as I said, I will simulate on Monday and post the results of my broker.

Even if they have nothing to do with your contest.

 

Once more,

have a nice Weekend,

 

Hal