Question

The initial margin on a GBP futures contract is $2035 and maintenance is $1850.   You buy one contract (62,500 Pounds) at $1.3100 and place $2035 in your account. The price of your contract drops to $1.2900 by the close that day. How much (minimum) must you deposit into your account to avoid the brokerage house from selling out your position?     

Answer 1

One contract of 62500 Pounds is bought at $1.31

=> portfolio value = 1.31*62500 = $81875

Initial margin = $2035

=> own fund = $2035

now price of contract dropped to $1.29

So, portfolio value now = 1.29*62500 = $80625

So a total profit = final value - initial value = 80625 - 81875 = -$1250

Or a loss of $1250

own fund available = initial margin - loss = 2035 - 1250 = $785

Maintenance margin = $1850

So, to avoid liquidation, own fund should be reached to maintenance margin by depositing fund in the account.

=> addition fund required = Maintenance margin - own fund available = 1850 - 785 = $1065