Question

You post the required initial margin of $2364 per contract and buy 3 wheat futures contracts for 5,000 bushels of wheat each at a futures price of $7.237 per bushel. At the close of the trading day, the futures price is $7.283. What is your account balance at the close of the day? Assume no margin calls.

Answer 1

Initial margin = $2364 per contract x 3 contracts (each contract of 5000 bushels) = $7092

Now, lets calculate difference in future prices of each bushel:

Gain per bushel = Per bushel price at end of period – Per bushel price at beginning of period

Gain per bushel = $7.283 – $7.237

Gain per bushel = $0.04600

Total gain = Gain per bushel x 3 contracts x 5000 bushel per contract

Total gain = 0.04600 x 3 x 5000

Total gain = $690

Now, we can calculate account balance at end of period:

Account balance = Initial margin + Total gain

Account balance = $7092 + $690

Account balance = $7782