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CFA Level I · CFA Level I Exam · Derivative Instrument and Derivative Market Features

A short futures position of 5 contracts, each covering 1,000 units, is opened at 80.00 with an initial margin of 6,000 in total and a maintenance margin of 4,500 in total. Settlement prices on the next two days are 81.00 and 81.60. Assuming no withdrawals or deposits until a margin call is triggered, the account balance after day 2 and the margin status are most likely:

The balance is 3,000 and a margin call restores the account to 6,000. Day 1 loss of 5,000 triggered a call that reset the balance to 6,000. Day 2 loss of 0.60 × 5,000 = 3,000 leaves 3,000, below maintenance, so the deposit must bring it back to the initial margin.

  1. A1,000 and a margin call to restore 6,000
  2. B3,000 and a margin call to restore 6,000Correct
  3. C3,000 and a margin call to restore 4,500

Explanation

Day 1: price up 1.00, short loses 1.00 × 5,000 = 5,000? That gives 1,000, which is below 4,500, so a call occurs on day 1. Recompute: day 1 balance is 6,000 - 5,000 = 1,000, and the call restores 6,000. Day 2: rise of 0.60 × 5,000 = 3,000 loss, giving 6,000 - 3,000 = 3,000, below 4,500, so another call restores to 6,000. The balance after day 2 before the deposit is 3,000.

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