Question

You buy 4 December gold futures contracts when the futures price is $1,801.45 per ounce. Each contract is on 100 ounces of gold and the initial margin per contract is $4,000. The maintenance margin per contract is $1,250. During the next 6 days the futures price falls slowly to $1,798.65 per ounce. What is the balance of your margin account at the end of the 6 days?

Answer 1

Sol:

Number of Gold futures contracts bought = 4

Gold futures contract buy price = $1,801.45 per ounce

Contract size = 100 ounces of gold

Initial margin per contract = $4,000

Maintenance margin per contract = $1,250

Futures price falls to $1,798.65 per ounce.

To determine balance of your margin account at the end of the 6 days:

Total initial margin = 4,000 x 4 = $16,000

Loss on future contract = (1,801.45 - 1,798.65) x 4 x 100

Loss on future contract = 2.8 x 4 x 100 = $1,120

Balance in Margin account = Total initial margin - Loss on future contract

Balance in Margin account = 16,000 - 1,120 = $14,880

Therefore balance of your margin account at the end of the 6 days will be $14,880.