Your broker requires an initial margin of $4,000 per futures contract on soybeans and a maintenance margin of $3,000 per contract. Soybean futures contracts are based on 5,000 bushels and quoted in cents per bushel. Yesterday, you bought six soybean futures contracts at the closing settlement price of 1380. Today, the settlement quote is 1335. All margin calls restore margin levels to their initial margin level. Will you receive a margin call and, if so, for what amount?
A)no margin call
B)call for $2,750
C)call for $8,000
D)call for $13,500
E)call for $20,000

Question

Quizplus · Accepted Answer

The price drop from 1380 to 1335 is 45 cents per bushel. For 6 contracts, each covering 5,000 bushels, the total loss is 45 cents x 5,000 bushels x 6 contracts = $13,500. Since this loss exceeds the initial margin, a margin call will be issued to restore the margin to the initial level, resulting in a call for $13,500.

Your Broker Requires an Initial Margin of $4,000 Per Futures