Question

Consider an investor who contacts his/her broker on June 5^th to enter into short position on 3 December soybean futures contract.

Each contract size is 50lbs. Initial margin requirement is $5000 per contract and maintenance margin requirement is $3750 per contract. Suppose that current futures price is $1250 per pound.

Using the daily settlement process, please answer the questions #1 - #3.

date	futures price			loss/gain			Acct bal. (after adjusting margin call)	Margin call
5-Jun	$1,250	/lbs
	$1,240	/lbs
6-Jun	$1,235	/lbs					XXXXXXXXXXXXXXXXXXXXXXXX
7-Jun	$1,215	/lbs
8-Jun	$1,245	/lbs
				total cum.loss/gain=

#1. Are there any margin calls? If so, when and by how much?

#2. How much is the total cumulative loss/gain for this account?

#3. What is the appropriate account balance at the end of June 6th, which is the highlighted part in the table above?

Answer 1

1) There are no margin calls as the balance never went below the maintenance margin level of $11250 ($3750*3)

2) Total cumulative Gain/Loss is $750

3) Balance at the end of Jun 6 is $17250.

Please refer to below working :

date	futures price		Gain/(Loss)	Acct bal. (after adjusting margin call)	Margin call
5-Jun	$1,250	/lbs		$15,000
	$1,240	/lbs	1500	$16,500
6-Jun	$1,235	/lbs	750	$17,250
7-Jun	$1,215	/lbs	3000	$20,250
8-Jun	$1,245	/lbs	-4500	$15,750
	total cum.loss/gain=		750

An account would gain if the price goes down and will suffer a loss if price goes up as this is a short position.

Gain/loss is applied to total 150 pounds as 3 contracts of 50 pounds each are entered into.