Question

Your broker requires an initial margin of $6,100 per futures contract on wheat and a maintenance margin of $4,400 per contract. Wheat futures contracts are based on 5,000 bushels and quoted in cents per bushel. You sold one wheat futures contract yesterday at the closing settlement price quote of 780. Today, the settlement quote is 802. Will you receive a margin call and if so, for what amount? All margin calls restore the margin level to its initial level.

Answer 1

Answer: No margin call

Explanation:

Based on the information given in the question, the new margin will be calculated as:

= Initial margin + (Sales - Settlement quote)/100 × Size

= 6100 + [(780 - 802)/100 × 5000]

= 6100 + (-22 × 5000)

= 6100 - 1100

= 5000

Since we've our new margin as 5000 while the maintenance margin is 4400, then there'll be no margin call once new margin is higher.