Question

On 9/24 at the end of the day, you sold (took a short position in) 1 futures contract (one contract is agreement to buy or sell Euros 125,000) at a rate of USD 1.15 per Euro, contract expires on 10/18. Initial margin=$2,875 and maintenance margin is $2,150. On 9/25 and 9/26, the futures rate expiring on 10/18 is USD 1.155, and USD 1.165 respectively. As per “Marked to Market” daily mechanism of currency futures contracts, what shall be your margin account balance at the end of 9/25(Assuming that you'll not withdraw money from your margin account and you do not earn interest on your margin account)? (Points : 3.5)

- On 9/25, you received a margin call from the broker to deposit $625 to bring up your margin balance on 9/25 back to $2,875.
- On 9/25, your margin account is debit a loss of $625, bringing down your margin balance on 9/25 to $2,250.
- On 9/25, your margin account is credit a gain of $625, bringing up your margin balance on 9/25 to $3,500..

Answer 1

		A	B	C=A*B
		Euro	Rate	Future value	Initial Margin	Maintenance margin	Gain/(Loss)	Margin account balance
	On 24/9	125000	$1.15/Euro	$        143,750	$2,875	$               2,150	$0	$2,875
	on 25/9	125000	$1.155	$144,375		$2,150	$      (625)	$2,250	(2875-625)
	on 26/9	125000	$1.165	$145,625			($1,250)	$1,000	(2250-1250)
	on 26/9	Margin Required		$2,150
		Margin available		$1,000
		Margin Call		$1,150	(2150-1000)
		Answer:
		On 9/25, your margin account is debit a loss of $625, bringing down your margin balance on 9/25 to $2,250.