Joan Tam is considering a second future’s trade, specifically on coffee

Initial margin is known as the margin is need when buying a share and maintenance margin is known as the minimum margin should be maintained in the margin account after purchase of stock until sale. So the investor receive margin call when his account balance go below the maintenance margin but the important thing is the margin balance should be brought to initial margin not to the maintenance margin .                       

Data Given:

Initial margin: $5000

Maintenance margin: $2500        

Future’s price is .56 per pound and lot size is 37000 pounds

price drops to .55 per pound which is loss of $0.01 pound per pound of coffee in Jan, so the total loss would be =37000* 0.01=$370

Margin account balance= 5000-370=$4630

price drops to .57 per pound which is gain of $0.01 pound per pound of coffee in Feb, so the total gain would be =37000* 0.01=$370

Margin account balance= 5000+370=$5370

price drops to .58 per pound which is gain of $0.02 pound per pound of coffee in Mar, so the total gain would be =37000* 0.02=$740

Margin account balance= 5000+740=$5740

price drops to .57 per pound which is gain of $0.03 pound per pound of coffee in Apr, so the total gain would be =37000* 0.03=$370

Margin account balance= 5000+1110=$6110

At the expiration the margin account balance would be = $6110