A trader buys a 90-day Eurodollar futures contract at 95.25. The next day, interest rates rise to 5.25%. Which of the following is true? Assume that the initial and maintenance margins are $5,000.
A) The trader would have to deposit an additional $5,000 into her account.
B) The trader would have to deposit an additional $1,250 into her account.
C) The trader would have to deposit an additional $625 into her account.
D) The trader could withdraw $1,250 from her margin account.
E) The trader could withdraw $625 from her margin account.

Question

Quizplus · Accepted Answer

The futures price change is 0.25 (from 95.25 to 95.00), which translates to a $625 loss per contract (0.25 * $25 per basis point). Since the loss is $625, the trader needs to deposit this amount to maintain the margin.

A Trader Buys a 90-Day Eurodollar Futures Contract at 95