Logan sold a corn futures contract using the initial margin of $2,700. His maintenance margin is $2,000. The price of corn began to rise in early summer, but Logan wants to keep his contract. When his margin falls below $2,000 (minimum maintenance)
A) his contract will be automatically sold or canceled.
B) he does not need to do anything since the most he can lose is $2,700.
C) he will need to deposit enough money in his margin account to bring the balance up to $2,000.
D) he will need to deliver the corn immediately.

Question

Quizplus · Accepted Answer

When a trader's margin falls below the maintenance margin, they must deposit additional funds to bring the account balance back up to the initial margin level, not just the maintenance level. This process is known as a margin call.

Logan Sold a Corn Futures Contract Using the Initial Margin