Gamma Airlines Professor Andr Farber Solvay Business School
Gamma Airlines Professor André Farber Solvay Business School Université Libre de Bruxelles Gamma Airline
Data • On September 16, 2005, Julius Blue, oil analyst at Gamma Airlines (G), was reviewing the sweet crude oil futures position that had been initiated some weeks before. • Julius had decided to take a long position on sweet crude oil futures contracts traded on the NYMEX. • On August 18, 2005, Julius bought 10 December 2005 futures contracts. The trading unit of one contract was 1, 000 barrels (158, 900 liters). The delivery point was Cushing, Oklahoma (but Julius’ intention was to sell the contracts before maturity). The margin requirements for one contract were: • Initial margin: $6, 075 • Maintenance margin: $4, 500 17 December 2021 Gamma Airline 2
Profit / Loss Long: Size of contract (1, 000 bbl) # contracts (10) Short: 17 December 2021 Gamma Airline 3
P/L calculation – whole period 17 December 2021 Gamma Airline 4
Margin calls – using weekly data – 1 contract Date F ∆F Initial deposit P/L Margin account Withdraw Th 18/8 64. 79 Fr 19/8 66. 63 1. 84 6, 075 1, 840 7, 915 1, 840 Fr 26/8 67. 42 0. 79 6, 075 790 6, 865 790 Fr 2/9 68. 10 0. 68 6, 075 680 6, 755 680 Fr 9/9 65. 41 -2. 69 6, 075 -2, 690 3, 385 Fr 16/9 63. 91 -1. 50 6, 075 -1, 500 4, 575 17 December 2021 Gamma Airline Margin call 2, 690 5
How many times did Gamma Airlines withdraw funds from the margin account? How much in total? 17 December 2021 Gamma Airline 6
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