Long SP500 future at a price of 1574 requires 10% margin investor posted 37500 into the margin account at contract initiation two days ago, the investor received a margin call and was required to post an additional 17500 what is the maintance margin on the contract? a 16750 b 17500 c 18750 d 22500

is it D? In futures, the variation margin is needed to bring the margin account back to the initial margin, not to the maintenance margin (as in the case of buying stock on margin). If the variation margin of 17,500 is required, then the margin account must have dropped to 37,500-17,500=20,000. A margin call is made when the funds in the margin account are below the maintenance margin. You need to look among the answers for a value>20,000. That would be D.

I was thinking about the value of the initial position… what was the multiple for S&P futures? Find the value of the position and then work from there …

Nice reasoning map1 - I was completely ost on this one but your explanation sounds about right. Say, if you are 6 foot 2, blonde-haired guy, do you think I could prevail on you to sit the exam for me?

That what I was thinking about . This question is very stupid. I tried to caculate the initial value of the future contract =1574*250=393500, Based on this amount, the investor should put at leaset 39350. But, as we saw, he only put 37500 which is not enough to cover his required margin.

it doesn’t work. see my caculation

chad17 Wrote: ------------------------------------------------------- > I was thinking about the value of the initial > position… what was the multiple for S&P futures? > Find the value of the position and then work from > there … it doesn’t work. see my caculation

Wouldn’t the initial margin be: (index level)*(Contract multiplier)*(initial margin) = (1574)*250*0.10 = 39,350? Using Map1’s logic 39350-17500 = 21,850 and 22,500 > 21850 so you still come up with the same answer but I was confused why the initial deposit was less than the initial margin

chasinggoats Wrote: ------------------------------------------------------- > Wouldn’t the initial margin be: > > (index level)*(Contract multiplier)*(initial > margin) > > = > > (1574)*250*0.10 = 39,350? > > Using Map1’s logic > > 39350-17500 = 21,850 > > and 22,500 > 21850 > > so you still come up with the same answer but I > was confused why the initial deposit was less than > the initial margin that is why this question is stupid