A. Forward vs. Futures Markets (continued)

• Assume initial margin was $1400 and maintenance margin is $1100. A has already sustained a loss of $150 so the value of the margin account is $1250. If the price drops by 4¢ the following day another $200 loss is registered. The value of the margin account is down to $1050, below the maintenance margin. This means A will be required to bring the margin account back to $1400.

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