The correct answer is $5.35.

Here's why:

1. You have entered into a short futures contract, which means you have agreed to sell silver in the future at a price of $5.15 per ounce.

2. If the futures price increases, you would be in a loss position because you have agreed to sell at a lower price.

3. The initial margin is the amount of money you must have in your account at the time you enter into the contract, which is $4,000 in this case.

4. The maintenance margin is the minimum amount of money you must have in your account after you have entered into the contract, which is $3,000 in this case.

5. A margin call is made if the balance in your margin account falls below the maintenance margin.

6. The futures price that represents the smallest change that will lead to a margin call is the price that would cause your margin account balance to fall just below the maintenance margin.

7. In this case, if the futures price increases to $5.35 per ounce, you would be in a loss position of $1,000 (which is the difference between $5.35 and $5.15, multiplied by the size of the contract, 5,000 ounces).

8. This $1,000 loss would reduce your margin account balance to $3,000, which is the maintenance margin. Any further increase in the futures price would cause your margin account balance to fall below the maintenance margin, leading to a margin call.

Therefore, the futures price of $5.35 represents the smallest change that will lead to a margin call.

Question

The correct answer is $5.35.

Here's why:

1. You have entered into a short futures contract, which means you have agreed to sell silver in the future at a price of $5.15 per ounce.

2. If the futures price increases, you would be in a loss position because you have agreed to sell at a lower price.

3. The initial margin is the amount of money you must have in your account at the time you enter into the contract, which is $4,000 in this case.

4. The maintenance margin is the minimum amount of money you must have in your account after you have entered into the contract, which is $3,000 in this case.

5. A margin call is made if the balance in your margin account falls below the maintenance margin.

6. The futures price that represents the smallest change that will lead to a margin call is the price that would cause your margin account balance to fall just below the maintenance margin.

7. In this case, if the futures price increases to $5.35 per ounce, you would be in a loss position of $1,000 (which is the difference between $5.35 and $5.15, multiplied by the size of the contract, 5,000 ounces).

8. This $1,000 loss would reduce your margin account balance to $3,000, which is the maintenance margin. Any further increase in the futures price would cause your margin account balance to fall below the maintenance margin, leading to a margin call.

Therefore, the futures price of $5.35 represents the smallest change that will lead to a margin call.

Knowee AI · Accepted Answer