FRM Part I · FRM Exam Part I · Futures Markets
A trader buys one crude oil futures contract covering 1,000 barrels at $80.00 per barrel. The initial margin is $6,000 and the maintenance margin is $4,500. After the first day, the settlement price is $79.20. Assuming the trader has deposited only the initial margin, what is the margin account balance at the end of day 1 and is a margin call triggered?
The balance is $5,200 with no margin call. The long position loses $0.80 per barrel on 1,000 barrels, or $800, which reduces the $6,000 initial margin to $5,200. That remains above the $4,500 maintenance margin, so no call is triggered.
- A$5,200; no margin callCorrect
- B$6,800; no margin call
- C$5,200; margin call
- D$4,500; margin call
Explanation
The long loses (80.00 - 79.20) x 1,000 = $800 from marking to market. The balance is 6,000 - 800 = $5,200, which is above the $4,500 maintenance level, so no margin call occurs. The $6,800 option adds the loss instead of subtracting it.
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