A company enters into a short futures contract for 50,000 pounds of cotton for 260 cents per pound. The initial margin is $4000 and the maintenance margin is $3000. What is the futures price ABOVE which there will be a margin call?

A company enters into a short futures contract for 50,000 pounds of cotton for 260 cents per pound. The initial margin is $4000 and the maintenance margin is $3000. What is the futures price ABOVE which there will be a margin call?

A company enters into a short futures contract for 50,000 pounds of cotton for 260 cents per pound. The initial margin is $4000 and the maintenance margin is $3000. What is the futures price ABOVE which there will be a margin call?



Answer:

3000-4000=-1000
-1000/50000=$-.02
260+2=262