Question

Futures price of March 22 Brent Crude Oil contract is 80 USD per barrel, 1 contract refers to 1000 barrel. Investors enters a long position in 5 futures contracts. How high is the initial margin, if clearing house requires 10% of the contract value? (calculation is required)

 

 

Answer 1

80 USD per barrel

1 contract refers to 1000 barrel

Total = 5 future contracts

 

Total contract value = Number of contract x Number of barrel per contract x Price per barrel

Total contract value =5 x 1000 x 80=$400000

Total contract value =$400000

 

Margin Required = 10%

Initial margin = 10% Total contract value

Initial margin = 0.1 x 400000=$40000

Initial margin = $40000

 

That much is initial margin.

Initial margin = $40000

That much is initial margin.