Acharya Bangalore B-School

Department of MBA
Subject: Risk Management and Derivatives
Faculty: Dr. Shalini H S

Problems on Margin Account:

1. An investor took short position in 10 future contracts of commodity at an exercise price
of Rs. 28.75/kg. The size of one future contract is 100kg. The initial margin for this
contract is 20% and the maintenance margin is 85% of initial margin. The future price
for the 1st 10 days of the contract is given below. Prepare a margin account for the first
10 days assuming that all margin calls are honored immediately.
Day 1 2 3 4 5 6 7 8 9 10
Price 28.9 29.75 29.10 28.85 29.65 30.15 31.25 31.50 32.25 31.60

2. From the following information prepare the margin account of the trader who had taken a
long position, number of contract is equal to 1; Number of units per contract is 50; Price
per unit on day 1 is Rs. 700; Initial margin being 12% and Maintenance margin is 75%.
Day 1 2 3 4 5 6 7 8 9
Price 693 682 663 648 623 610 633 638 621

3. An investor took short position in 10 future contract on rice at an exercise price of Rs.
22/kg. The size of one future contract is 1000kgs. The initial margin requirement on this
contract is 12% of the contract value and the maintenance margin is 75% of the initial
margin. The future price for the first 10 days of the contract is given below. Prepare a
margin account for the first 10 days assuming that all margin calls are honored
immediately and money in excess of initial margin is withdrawn immediately.
Day 1 2 3 4 5 6 7 8 9 10
Price 21.50 22.25 22.75 22.40 22.70 22.50 23.75 23.25 22.80 23.00

4. A future contract is available for petrol at $28 per barrel. Each contract is for Rs. 1 lakh
barrels. You have contracted for 8 long futures. The contract is entered into on 15th June
2013 and expires 30th June 2013. The initial margin is 10% of the contract value and
maintenance margin is 75%. You have to prepare a statement of marking to market showing:
i) Daily P/L
ii) Margin A/c balance
1
iii) Margin call
June 16 17 18 19 20 21 22 23 24 25 26 27 28 29
2015

Price 28.5 31 33 29 28.25 27.55 26.50 26.45 26.10 26.70 25.95 25.45 25.15 25.75
of
Petrol
(per
barrel)

5. Prepare a margin account for the first ten days. An investor takes a long position in two
soyabean future contracts. The initial margin for one contract is Rs. 2000 and maintenance
margin is Rs. 1500 per contract (Assume one contract size = 100). The price entered
(exercise price) is Rs. 600. Show the daily gain (loss), cumulative gain (loss), Margin
account balance, Margin call. The prices on closing day are as follows:

Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8 Day 9 Day 10

597 596.10 598.20 597.10 596.70 595.40 593.30 593.60 591.80 592.70

6. A sold January Nifty Futures contract for Rs. 21,50,000. For this he paid an initial margin
of Rs. 2,15,000 to his broker. Each Nifty Futures contract is for the delivery of 200 Nifties.
On settlement date, Nifty closed on 10,850. How much profit/ loss A has made? (July 2018)
7. Suppose Mr. Naga Sinha bought 1 contract of Andhra Bank Futures (each underlying
8000 equity shares) for Rs. 63.80 per share. The initial margin is 50% and the maintenance
margin is 40%. Suppose that the stock price drops to Rs. 57.00 per share.
i) Does Naga Sinha need to put additional funds to his account? If yes, how much?
ii) What is the break-even price Andhra bank can fall befor X receives a small margin call?
iii) Suppose the price rises to Rs. 70, what is Naga Sinha’s rate of return on investment?
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