# Derivatives Qn

A silver futures contract requires the seller to deliver 5,000 Troy ounces of silver. An investor sells one July silver futures contract at a price of \$8 per ounce, posting a \$2,025 initial margin. If the required maintenance margin is \$1,500, the price per ounce at which the investor would first receive a maintenance margin call is closest to: A. \$5.92. B. \$7.89. C. \$8.11. D. \$10.80.

D? Not sure

Answer C quick way to the answer => (2025 - 1500) / 5000 = 0.105 8 + 0.105 = \$ 8.105 Since he is selling he willl get a margin call when his price rises.

Thanks Oagra… Right on target!!!

nvm

initial margin: \$2025 maintenance margin: \$1500 position has to go \$525 against him for him to touch his maintenance margin level. per ounce that is 525/5000 = 0.105 since he is short, price has to go up (already this eliminates A and B) by \$0.105. Therefore answer is C

price = 8 * (1+2025/40000) / (1+1500/40000) = 8.10 basically margin call for a short position. can someone confirm this?

I answered D but I am not sure what the signal is to determine whether he gets a margin call when price falls or rises. Anyone have the answ to that?

barthezz…you’re right. webtwister: when you’re in a short position, you will receive a call when the price rises, and when you’re in a long position ->when price falls

Thanks, you are def right. just thought about it now.

thanks kevin.