Question

You enter into a short crude oil futures contract at $43 per barrel. The initial margin is $3,375 and the maintenence margin is $2,500. One contract is for 1,000 barrels of oil. By how much do oil prices have to change before you receive a margin call

Answer 1

The correct answer is "43.875". A further explanation is provided below.

Step-by-step explanation:

The given values are:

Initial margin,

= $3,375

Maintenance margin,

= $2,500

Barrels of oil,

= 1,000

Now,

The loss on the position will be:

=
`3375-2500`

=
`875` ($)

then,

⇒
`1000 (P - 43) = 875`

⇒
`1000P-43000=875`

On adding "43000" both sides, we get

⇒
`1000P-43000+43000=875+43000`

⇒
`1000P=43875`

⇒
`P=(43875)/(1000)`

⇒
`=43.875`