You purchase a silver futures contract when silver was quote

You purchase a silver futures contract when silver was quoted at 1,370cents/oz. The contract was written on 5,000oz.

The broker required an initial margin of 20%.

Right now silver is quoted 1,265 cents/oz.

What is the return of this position?

Answer in percent without the symbol

Your Answer:

Solution

1 silver contract 5000 Oz Purchased Value = 5000 x 1,370 cents/100 $68,500.00 Initial Margin = $68,500 x 20% $13,700.00 Market Value = 5000 x 1265/100 $63,250.00 Profit = ($63,250 - $68,500) -$5,250.00 Return = -$5250/$13700 -38.32 % or - .3832 Silver contract goes down to 1265 cents that means a profit.