You purchase 15 futures contracts with an initial margin of $2,500 and a maintenance margin of $1,700. If the futures contracts call for delivery of 50,000 bushels, what is the most the underlying asset can fall in price before you receive a margin call?
A) $0.016
B) $0.013
C) $0.009
D) $0.024
E) $0.021

Question

Quizplus · Accepted Answer

The initial margin is $2,500 and the maintenance margin is $1,700, so the difference is $800. This is the amount that can be lost per contract before a margin call is triggered. Since each contract is for 50,000 bushels, the price can fall by $800 / 50,000 = $0.016 per bushel before a margin call occurs.

You Purchase 15 Futures Contracts with an Initial Margin of $2,500