Question

You short 25 oil futures contracts at a price of $1.52 per gallon, where each contract represents
42,000 gallons. You initial margin is $6,075 per contract, and the maintenance margin is 4,500
per contract. If the settlement price today is $1.59, what is your gain or loss? Will you receive a
margin call? If so, how much do you need to deposit into the account?

Answer 1

The settlement price is greater than the initial contract price. So, a short seller would be in loss.

Loss = (Settlement price - Initial price) * Contract size * Number of contracts

Loss = (1.59 - 1.52) * 42,000 * 25

Loss = $73,500

Loss per contract = 73,500/25 = $2,940

The balance in our account per contract = Initial margin - Loss per contract

The balance in our account per contract = 6,075 - 2,940

The balance in our account per contract = $3,135

Yes, we will get a margin call because the balance in our account is less than the maintenance margin.

We need to deposit (4,500 - 3,135) * 25 = $34,125 into our account.