Garp Question Financial Markets and Products Book

[ASING3038]

Hi David, I have queries regarding following two questions from Garp Book (Financial Markets and Products)

a) A trader contacts a broker to enter into a futures contract to sell 5,000 bushels of wheat for 600 cents per bushel. The initial margin is USD 30,000 and the maintenance margin is USD 20,000. Under what circumstances is the trader required to provide more margin? How much margin is required? Under what circumstances can USD 500 be withdrawn from the margin account?

b)Suppose on a particular day, there are 3000 trades in a futures contract. Of the buyers in those 3000 trades, 1800 were closing out positions and 1200 were taking new positions. Of the sellers in those 3000 trades, 1400 were closing out positions and 1600 were taking new positions. What is the change in open interest during the day? Does in increase or decrease?

Could you please provide answers to the above questions?

 

[Sixcarbs]

For b, there is probably a formula, but easier to just match things up.

closing	1800​		1400​	closing
opening	1200​		1600​	opening
closing	1400​		1400​	closing
closing	400​		400​	opening
opening	1200​		1200​	opening

For open interest,

Both sides closing, reduces open interest.
Both sides opening increases open interest.
One side opening, one side closing, open interest remains the same.

So, from above
1400 closing/closing --> decrease 1400
1200 opening/opening --> increase 1200
400 opening/closing ---> no change

So the answer is opening interest decreases by 200.