Margin accounts and futures delivery

Question

I'm trying to understand the market mechanics of futures with delivery. For sake of example, assume 0 interest rates and no cost of carry, and that I bought a futures contract on Jan 1 with Feb 1 expiry for $100, on some fictional commodity. On Feb 1 the spot price proves to be $150. I put in $20 in the margin account. So, am I correct in saying that

my margin account will have increased by $50
I pay $100 to the clearing house and am delivered the commodity
I can sell the commodity in the spot market for $150, thus pocketing $150-$100 = $50 off of this transaction and the last
I made $100 on this trade, 50 from the margin acct and 50 from the previous bullet point??

Basically to me it seems like I made 50 dollars twice, once through the margin account, and once via the spot market and futures expiry. Obviously something is wrong here. My question is:

Does the futures price moving from 100 to 150 mean I can make 50+50=100? Or is my logic wrong somewhere?

Svetkovski · Accepted Answer

The flaw lies with bullet point #2. When you hold to maturity a long future contract position with physical settlement, you pay the final settlement price as calculated by the exchange for the underlying you receive and not your initial purchase price. In your example this would be 150 USD and not 100 USD.
The 50 USD you made on your margin account since you initiated the position reflect your realized gains. Your margin account receives or pays the daily change in your PnL, a.k.a. mark-to-market. This is also the reason why settlement at maturity takes place at the final settlement price - all previous changes in price are already reflected in your margin account.
-edit: Delivery price is fixed and written into the contract at the time you enter into the trade. Margins will be released upon delivery.

Margin accounts and futures delivery

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