Question

On 8/24 at the end of the day, Jim sold (took a short position in) 1 futures contract (one contract is agreement to buy or sell Australian dollars 100,000) at a rate of $0.67140 per Australian dollar, contract expires on 12/18. Initial margin=$1,210 and maintenance margin is $1,100. On 8/25 and 8/26, the futures rate expiring on 12/18 is $0.67280 per Australian dollar, and $0.67310 per Australian dollar respectively. As per “Marked to Market” daily mechanism of currency futures contracts, what would be Jim’s margin account balance at the end of 8/26(Assuming that Jim will not withdraw money from his margin account)?

	On 8/26, Jim’s margin balance would be $1,180 due to loss of $30 realized from the change in the futures rate.
	On 8/26, Jim’s margin balance would be $1,380 due to the gain of $30 realized from the change in the futures rate.
	On 8/26, Jim would receive another margin call to deposit $170 to bring up his margin balance on 8/26 back to $1,100.
	On 8/26, Jim would receive another margin call to deposit $30 to bring up his margin balance on 8/26 back to $1,100.
	On 8/26, Jim would receive another margin call to deposit $170 to bring up his margin balance on 8/26 back to $1210.
	On 8/26, Jim’s margin balance would be $1,520 due to the gain of $170 realized from the change in the futures rate.

Answer 1

Answer c) On 8/26, Jim would receive another margin call to deposit $170 to bring up his margin balance on 8/26 back to $1,100.

Jim's margin account balance at the end of 8/26 Date 8/24 Activity Margin ($) Sold Futures @$0.67140 /Australian $(lot size -100000) Balance 1210 Additional margin call ($) Maintenance margin ($) 1100 1210 - 8/25 Rate - $0.67280 -140 1070 1100 (0.67140- 0.67280)*100000 Balance after Adding margin call - 30$ 1100 8/26 Rate - $0.67310 -170 930 (0.67140- 0.67310) *100000 Balance after Adding margin call - 170$