Question

You have entered a short position in an oil futures contract. The contract size is 1,000 barrels for each contract. The initial margin required is $20,000 per contract. The maintenance margin is $16,000. The contract is entered at market close on January 7 at a price of $100/barrel. Fill in the table below. If a margin call occurs, indicate in the margin call column the amount that has been added to the margin account as a result of the margin call and adjust the margin account balance accordingly in the next period. Please round to the nearest dollar.

Day	Futures Price ($)	Daily Gain/Loss ($)	Margin Account Balance ($)	Margin Call ($)
Jan. 7	100	0	20,000	0
Jan. 8	102
Jan. 9	105
Jan. 10	104
Jan. 11	102

What is the margin account balance on January 11?

Answer 1

As it is a short position, a fall in the contract price will result in a gain, and a rise in the contract price will result in a loss.

Daily gain/loss = (previous day price - current day price) * contract size

If the margin account balance falls below the maintenance margin, a margin call will be made.

Amount of margin call = amount required to bring the margin account balance back up to the initial margin.

margin account balance on January 11 = $23,000