Determining the margin account and maintenance margin

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An investor enters into a short position in two April 2012 crude oil futures contracts. Each contract is for the delivery of 1,000 barrels. The initial margin is $8,000 per contract and the maintenance margin is $5,000 per contract. The futures price when the investor enters the contracts is $108.3 per barrel.

a. Explain briefly what is the margin account and the maintenance margin requirements by the broker.

b. In which condition could the investor withdraw $4,200 from his current trading account?

c. In which situation should the investor face a margin call and what he is expected to do to maintain the trade opened? And what will happen if he does not meet the margin call requirements?

Reference no: EM132794310

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