Question: You bought an October futures contract on petroleum at $42.50 per barrel. One contract represents 1.000 barrels of petroleum. Initial margin on the contract was $1688.8. Maintenance margin is equal to $1200.By the end of the day the price had increased to $43.00 per barrel.
- Will you get a margin call? If yes, how much money will you have to deposit? If no. can you withdraw any money? How much?
- If you are a speculator, when would you enter in this position?
- What would be the return on your investment if you shorted futures contracts at a futures price of $42.50 and later closed your position at $43 per barrel?
- As a speculator, could you take a position in the forward market? What are the main differences between futures and forward markets?