CFA Practice Question

CFA Practice Question

A trader enters into the long side of 500 Futures contracts each of which requires a margin of $6. The initial Futures price is $50. The maintenance margin is $4. At the end of the first day the settlement price is $50.63. At the end of the second day the settlement price falls to $44.95. What is the margin call?
A. $2,525
B. $2,840
C. $525
Explanation: The position has suffered a loss of $5.05 per contract, which is greater than the maintenance margin, so there will be a margin call. The margin call will be such that the margin account is taken back to the original margin of $6 per contract and not the maintenance margin of $4 per contract. Thus the margin call per contract will be $5.05 and the total will be 500 * $5.05 = $2,525

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