It is April 15, and a trader is entered into a short
position in two soybean meal futures contracts. The contracts expire on August
15, and call for the delivery of 100 tons of soybean meal each. Further, because
this is a futures position, it requires the posting of a $3000 initial margin
and a $1500 maintenance margin per contract. For simplicity, however, assume
that the account is marked to market on a monthly basis. Assume the following
represent the contract delivery prices (in dollars per ton) that prevail on each
settlement date:
|
April 15 (initiation)
May 15
June 15
July 15
August 15 (delivery)
|
173.00
179.75
189.00
182.50
174.25
|
Based on the May 15 settlement date, which of the following is
TRUE
A. Since the equity value fell below the maintenance level, a
variation margin is called.
B. Due to the fact that the equity value falls below the initial
margin, a variation margin is called to restore the equity value of the account
to it’s initial level.
C. The equity value falls below the initial margin.
