An investor bought a March S&P 500 Index futures contract in December for $1,490.05. After six months the contract value went down to $1,466.00. The contract has a multiplier of 250. With an initial margin of $20,000, and a $16,000 maintenance margin requirement, would there be a call for more margin?
A)No, the account would have an excess of $2,012.50
B)Yes, an additional $3,677.19 would be required
C)No, the account would have exactly enough cash for margin
D)Yes, an additional $2,012.50 would be required
E)No, the account would have an excess of $3,677.19

Question

Quizplus · Accepted Answer

The loss on the futures contract is calculated as follows: (1,490.05 - 1,466.00) * 250 = $6,012.50. Since the initial margin is $20,000, after the loss, the account balance would be $20,000 - $6,012.50 = $13,987.50. With a maintenance margin requirement of $16,000, the investor would need to add funds to bring the account back to the initial margin level. The additional amount required is $16,000 - $13,987.50 = $2,012.50.

An Investor Bought a March S&P 500 Index Futures Contract