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FRM Part I · FRM Exam Part I · Exchanges and OTC Markets

A trader opens a long position of 20 futures contracts at 1,500 on a contract with a multiplier of 50. Initial margin is 6,000 per contract and the maintenance margin is 4,500 per contract. The trader deposits only the initial margin. The futures price falls to 1,470 at the end of the day. What is the margin balance after that day's settlement, and is there a margin call?

The margin balance is 90,000 after a 30,000 loss from the 120,000 deposit. Maintenance is also 90,000, and calls arise only when the balance falls below it, so there is no margin call.

  1. ABalance 90,000; margin call for 30,000Correct
  2. BBalance 120,000; no margin call
  3. CBalance 90,000; no margin call
  4. DBalance 30,000; margin call for 90,000

Explanation

Initial deposit is 20 × 6,000 = 120,000. Loss is 30 × 50 × 20 = 30,000, leaving 90,000. Maintenance is 20 × 4,500 = 90,000. The balance equals but does not fall below maintenance, so there is no call. Correction: with balance exactly equal to maintenance, no call arises, so the answer should be balance 90,000 with no margin call.

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