question archive Alfred takes the short position on 10 oil futures contracts at a futures price of $75 per barrel
Alfred takes the short position on 10 oil futures contracts at a futures price of $75 per barrel
Subject:FinancePrice:2.87 Bought7
Alfred takes the short position on 10 oil futures contracts at a futures price of $75 per barrel. Each contract is on 1,000 barrels of oil. Settlement prices on the next 4 days are given as follows:
Day
Price
1 $75.50
2 $79
3 $77
4 $75
The exchange enforces an initial margin requirement of 10% and a maintenance margin of 5%.
The minimum amount that Alfred must deposit in his futures margin account to take his desired position is closest to:
$75,000
$37,500
$750,000
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Answer:
The minimum amount that Alfred must deposit in his futures margin account to take his desired position is closest to:
- $75,000
Step-by-step explanation
The minimum amount that Alfred must deposit in his futures margin account to take his desired position is the initial margin.
Initial Margin = 10% * Value of Short Position
Initial Margin = 10% * 10 Contracts * $75 future price * 1000 barrels
Initial Margin = 10% * 10 * 75 * 1000 = 75000
