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FRM-1 Study Notes

Reading the newspaper*

Precious Metals
Gold Comex (100 Troy oz; $/troy oz)
Sett price Day’s chge High Low Vol ’000s 0 int ’000s
Dec 738.7 -8.5 748.5 736.7 111.8 300.3
Feb 745.0 -8.6 754.8 743.5 6.00 31.86
Total 123.7 449.5
  • Settlement price: this price is used for margin call calculations at end of trading day
  • Change : -$8.5 per troy ounce. Hence, total of 100*$8.5=$850 reduction in margin account balance
  • Open interest: total number of contracts outstanding with the exchange. It is the total number of long positions / the total number of short positions. It is one trading day older than the prices’ day
Time Trading Activity Open Interest
Jan 1 A  buys 1 option and B sells 1 option  contract 1
Jan 2 C buys 5 option and D sells 5 option  contract 6
Jan 3 A sells his 1 option and D buys 1 options contract 5
Jan 4 E buys 5 options from C who sells 5 options contracts 5
  • On January 1, A buys an option, which leaves an open interest and also creates trading volume of 1
  • On January 2, C and D create trading volume of 5 and there are also five more options left open
  • On January 3, A and D take offsetting positions, open interest is reduced by 1 and trading volume is 1
  • On January 4, E simply replaces C and open interest does not change, trading volume increased by 5

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