You are trading a centain futures. You purchased 2 contracts today. The purchase

Question

You are trading a centain futures. You purchased 2 contracts today. The purchase price of the futures per one contract was $75. The contract size of the futures per contract is 200. The initial margin requirement is $5,000 per contract for the futures. Hence, you just deposited initial margin requirements. The maintenance margin for the $2,500 per contract. Suppose, next day, the price of the futures declined to $70. What happened to your margin account?

Nothing happen. He does not have to do anything about his margin account.

He has to deposit extra money to satisfy the maintenance margin.

He has to deposit extra money to satisfy the initial margin.

Explanation / Answer

Maintenance margin is to be maintained in case the price of the future contract declines below the limit. In the given case the price has declined from $75 to $70, hence total value decline is = 2 contracts *200 Futures *5 = $2000.

Now the maintenance margin is $2500. It means the decline in price is not more than margin requirement.

So Nothing happen. He does not have to do anything about his margin account.

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