Reference no: EM132753902

Alfred takes the short position on 10 oil futures contracts at a futures price of $75 per barrel. Each contract is on 1,000 barrels of oil. Settlement prices on the next 4 days are given as follows:

Day        Price
1           $75.50
2               $79
3               $77
4                    $75

The exchange enforces an initial margin requirement of 10% and a maintenance margin of 5%.

Problem 1: Assuming that Alfred withdraws no money from his account, meets all margin calls, and closes his position at the end of Day 4, the balance in his account would be closest to:

Option 1: $115,000
Option 2: $77,500
Option 3: $75,000