(21 QUESTION 2 MARKS) Steven is very good in speculating the market. All the time he will analyse the market based on th

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21 Question 2 Marks Steven Is Very Good In Speculating The Market All The Time He Will Analyse The Market Based On Th 1 (85.73 KiB) Viewed 59 times

(21 QUESTION 2 MARKS) Steven is very good in speculating the market. All the time he will analyse the market based on the fundamental and technical analysis. He noticed now the Kala Lumpur Composite Index (KLCI) is dropped from 1255 to 978 in the past three months ago. Since the market now is less volatile, the beta shows half riskier than the market. Last three months ago, the beta shown at 1.1 after dropped from 1.25. He believes that he is able to take advantage on today market conditions and as a speculator he is bearish on the underlying market price in the near future. John has RM150 millions of portfolio and he informed her broker to trade for two fifth of his portfolio, the futures price evolved as follows. (Assume to round off the contract number): NE Day 1 2 3 4 5 Settlement Price 972 980 1025 999 981 Required: a. If John bearish on the market, what speculative strategy should she enters? Explain. (2 marks) (CLO2:PLOI:C2) b. If the market unexpectedly as his expectation, any possibility would be arising? Elaborate your answers. (3 marks) (CLO2:PLOI:C5) c. Calculate the contract value of the KLCI futures contract. (2 marks) (CLO2:PLO1:C4) d. If the initial margin is 10% of contract value and the maintenance margin is 85%, prepare the marked-to-market. (8 marks) (CLO2.PLOI:C4) e. Why speculators prefer to speculate instead of hedging or arbitrage? Discuss the pro and contra each of the strategies.