Suppose that you enter into two short futures contracts to s

       Suppose that you enter into two short futures contracts to sell July corn for $16.60 per bushel. The size of the contract is 5,000 ounces. The initial margin is $5,000 per contract, and the maintenance margin is $3,700 per contract. What change in the futures price will lead to a margin call? Under what circumstances $1,800 could be withdrawn from the margin account?

Solution

The margin call difference is ($5,000 - $3,700) = $1,300 which is loss in the contract. this will happen if the selling price increases by 20% i.e., $16.60 to $19.92 per bushel.

The $1,800 can be withdrawn from the margin account if the future prices fall by 36% ($1,800 / $5,000) i.e, $10.62 per bushel.