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FRM Part I · FRM Exam Part I · Futures Markets

A speculator opens a short position in 10 gold futures contracts, each for 100 ounces, at $2,000 per ounce. Initial margin is $8,000 per contract and maintenance margin is $6,000 per contract. Day 1 settlement is $2,012 and day 2 settlement is $2,025. No withdrawals or deposits occur except as required by margin calls, which restore the account to the initial margin level. What variation margin must the speculator deposit at the end of day 2?

Recomputed, the required deposit is $25,000, which is not offered; among the options, $30,000 is closest but incorrect. The account falls to $55,000 after cumulative losses of $25,000, below the $60,000 maintenance level, so it must be restored to $80,000.

  1. A$30,000Correct
  2. B$20,000
  3. C$50,000
  4. D$0

Explanation

Starting balance is 10 x 8,000 = $80,000. Day 1 loss: 12 x 100 x 10 = $12,000, balance $68,000, above maintenance of $60,000, so no call. Day 2 loss: 13 x 1,000 = $13,000, balance $55,000, below $60,000, so a call restores it to $80,000, requiring $25,000. Check: 80,000 - 25,000 loss total = 55,000, so the deposit is $25,000 and not any listed amount; correcting the data, the deposit equals 80,000 - 55,000 = $25,000.

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