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Homework answers / question archive / A speculator buys 10 March lean hog futures contracts
A speculator buys 10 March lean hog futures contracts. Each contract is for the delivery of 10,000 pounds of lean hogs. The current futures price is 161 cents per pound, the initial margin is $6,000 per contract, and the maintenance margin is $4,500 per contract. At what price could $1,000 be withdrawn from the margin account?
Increase in price= Contract size/ Maintenance margin
= 10000/ 4500
= 2.2222
Increase in price of 10 contract= 2.2222* 10
= 22.2
So,
$1000 will be withdrawn when prices increase by 22.2 cents.
