Question

Contract to be traded = 30 contracts

Each contract size = 1000 barrel

Maintenance margin required = $4600 per contract

Suppose that current futures price is $36.50 per barrel.

Initial margin requirement is set at 110% of the maintenance margin.

Suppose the following futures prices occur for each day. Note that following traded price and futures prices are per-barrel-price.

date	traded price	settlement price	daily loss/gain	cum. loss/gain	Acct bal.	Margin call (yes/no)	"variation margin" margin call amt ($)	Acct. bal (after adjusting margin call)
10-Dec	$36.50
		$36.76
11-Dec		$37.16
12-Dec		$37.51
13-Dec		$37.65
14-Dec	$37.00
			total cum.loss/gain=	0

1) FIND THE INITIAL MARGIN AND MAINTENANCE MARGIN FOR THE TOTAL CONTRACT, RESPECTIVELY.    WHAT IS THE ACCOUNT BALANCE ON DEC/12?

2) IS THERE ANY MARGIN CALL? IF SO, WHEN DOES IT OCCUR? AND HOW MUCH IS NEEDED TO RESPOND TO THE MARGIN CALL (i.e. what is the variation margin)?

3) WHAT IS THE TOTAL CUMULATIVE LOSS OR GAIN?

Answer 1

1) Initial margin= Contract price×margin percentage× No. of contract

=$ (4600×110%)×30= $151800

Maintenance margin= $4600 per contract(given)× no.of contract

=$4600×30=$138000

Short Position

Day	Price per barrel ($) (1)	Price for 30 contract($) (2)=[(1)×30×1000]	P/L for the day($) (3)	Margin Account($) (4)	Margin call($)(5)
Dec 10	36.50	1095000	_	151800	_
Dec 11	36.76	1102800	(1095000 ​​​​​​-1102800) = -7800	(151800-7800) =144000	_
Dec 12	37.16	1114800	(1102800-1114800) = -12000	(144000-12000) = 132000	(151800-132000) =19800
Dec 13	37.51	1125300	(1114800-1125300) = -10500	(151800-10500) = 141300	_
Dec 14	37.65	1129500	(1125300-1129500) = -4200	(141300-4200) = 137100	(151800-137100) =14700
Dec 15	37	1110000	(1129500-1110000) = 19500	(151800+19500) =171300	_

  

2) Total margin call=$34500

3) Total loss/ gain= Final balance in margin account- Initial margin-margin call paid

=$ (171300-151800-34500)

=$ -15000