Margin maintenance requirement

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Assume the current spot price for crude oil is $66.65 per barrel and the futures price for crude oil is $66.70 per barrel. A futures contract is for 1000 barrels.

On Monday, Stacey buys one futures contract from Ben. Both Stacey and Ben are speculators in this futures market, whose initial margin requirement is $7,500 and whose margin maintenance requirement is $5,500. For hedgers the initial margin requirement is the same as the margin maintenance requirement. Assume that Stacey and Ben will always keep the minimum required amount in their margin accounts. Also, assume (artificially) that no marking to market is done on the expiration date of the contract.

1. How much must Stacey deposit in her margin account in order to buy this futures contract?

2. How much must Ben deposit in his margin account in order to sell this futures contract?

Reference no: EM131448502

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