question archive Your broker requires an initial margin of $850 per futures contract on wheat and a maintenance margin of $650 per contract
Your broker requires an initial margin of $850 per futures contract on wheat and a maintenance margin of $650 per contract
Subject:FinancePrice:2.86 Bought3
Your broker requires an initial margin of $850 per futures contract on wheat and a maintenance margin of $650 per contract. Wheat futures contracts are based on 5,000 bushels and quoted in cents per bushel. You bought 6 wheat futures contracts at a price of 585 cents per bushels. Today, the settlement quote is 578 cents per bushels. Will you receive a margin call and if so, for what amount (6 contracts totally)? Assume you have not received any previous margin calls.
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The total change in price is = 585 - 578= 7 cents per bushel. Hence, it will be = 7 x 5000 cents per contract = $350 per contract. Hence, we have had a loss of $350 per contract and since we had given an inital margin of 850 per contract, it will now be worth 850 - 350 = $500. Since this is below the maintenance margin, we will receive a margin call. Now we will have to deposit an amount to make it equal to intial margin. Hence, we will have to deposit 850 - 500 = $350.
