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the assignment must have an excel as working which will need to be turned in via turn it in, using data from https://www.eia.gov

2021-Midterm Assignment
Q1: FUTURES:
As a sophisticated energy trader, you apply your knowledge to both crude oil and natural gas markets. Starting Jan 1st 2010 you decide to implement the following rules
The day following expiry of the front month contract, you are going to go long the front month and short the 2nd month if the markets are in backwardation, and short the front month and long the 2nd month if the markets are in contango. You will hold the position to expiry unless the market flips the contango/backwardation condition. If this occurs you close the position out on this day and wait till the next expiry to re-enter the new contracts.
You initially have $1 million to start-split equally across both commodities, and you will use this capital to back the positions. You setup the capital so that you never use more than 50% of the capital to try to avoid margin calls. Your account earns 50 basis points for capital not locked up in margin.
The risk team at your custodian doesn’t offer offsetting margin, but will only require you to post margin for the long-side of the position. The initial margin is 10% and the maintanance margin is 5%
• Calculate the total annualized return for the strategy over the period (answer in %)
• Calculate the dollar return for the oil and natural gas separately ($ in millions...first answer for oil, second for nat gas-comma separate your answer....no parenthesis needed)
• How often were the markets in contango (as a % of the total)
• How profitable was the combined strategy in contango markets ($ in millions) • How profitable was the combined strategy in backwardation ($ in millions)
• How many total margin calls were there?
Q2: SWAPS.
Assuming 5 years ago (starting March 1st 2016) you entered into a 10 million dollar annual payments equity swap with receive NASDAQ returns/ pay HANG SENG returns. Calculate the following
• The cash flow received or paid in 2017,2018,2019,2020 & 2021 ($ in Millions)
• What is the current value of the swap? ($ in Millions)
• Explain your answer. (Qualitative)
Q3: OPTIONS VERSUS FUTURES
MAR 2021 MAR 2021
Show Price
Chart
3965.00 -2.50 3967.50 3967.00 3980.50 3952.75 759,489 14:14:43
CT
16 Mar
2021
JUN 2021 JUN 2021
Show Price Chart
3954.75 -3.50 3958.25 3957.75 3970.75 3942.75 1,693,229 14:14:44
CT
16 Mar
2021
SEP 2021 SEP 2021
Show Price Chart
3942.25 -6.00 3948.25 3942.25 3960.00 3934.00 631 14:04:02
CT
16 Mar
2021
DEC 2021 DEC 2021
Show Price Chart
3940.00 +6.00 3934.00 3940.00 3940.00 3940.00 1 08:30:00
CT
16 Mar
2021
MAR 2022 MAR 2022
Show Price Chart
- - 3920.50 - - - 0 08:30:00
CT
16 Mar
2021
JUN 2022 JUN 2022
Show Price Chart
- - 3905.25 - - - 0 08:30:00
CT
16 Mar
2021
Current S&P 500 Price: 3964.88
Assume you have $1 million dollars to invest and using the data in the OPTION MIDTERM excel and the ES FUTURES info above,
• What June 2021 Monthly expiry put strike gives you the best $ profit if the S&P 500 fell 10% by expiry (assume you have to invest in whole units) ?
• What if the S&P 500 fell 20%?
• What price would the S&P 500 have to be at so you are indifferent between the 3000 put and the JUNE ES future.
• Using your available capital, let’s say you went short a 5% OTM call, went long JUNE ES futures, and went long a 10% OTM put. What is your max & min profit to this strategy and the corresponding index price. ($ in millions, Price of index)
• What is the downside to doing the above structure? (Qualitative Question)

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