All purchases and sales are assumed, for simplicity, to take place at the settlement price on the day of the trade. The required initial and maintenance margins per contract are as follows:

In your calculation use 42,000 gallons per contract.

initial margins- spot month=3000, non spot month=2000

maintenance margins- spot month=2100, non spot month=1400

The Spot month is the closest (nearest)delivery month.

Therefore in our problem in April the spot month is May, while June is not a spot month.

The Table assumes that the account is opened on April 3 with a deposit of $5,000, in anticipation of making future trades, and it requiresto fill in the blanks in the two blank columns (Marking to market and Margin account) in accordance with the daily transactions made in the margin account, from April 3 through April 24, because of the transactions which are described for each and every day.

April 3

Customer purchases 2 May contracts resulting in an initial margin call for $1000, which is the difference between the customer's $5000 deposit on the previous day and the initial margin requirement of $6000 (3000 x 2 = $6000).

April 4

Customer responds to the margin call and deposits $1000.His account experiences an unrealized gain of $1352.40 during the day, bringing his equity to $ 7352.40.Since the equity is above the initial margin requirement, the customer is entitled to withdraw cashif he wishes, but he does not.

April 5

A substantial drop in gasoline prices result in an unrealized loss of $ 2545.20.The equity falls to $4807.20.Since total equity is still above the $4200 ($2100 x 2) maintenance margin level, no margin call is issued.

April 6

Gasoline prices continue to decline, resulting in another loss of $1579.20, further reducing equity to $ 3228.00.Since equity is now less than the required maintenance margin of $4200, a variation margin call is issued for $2772 ($6000-$3228 = $2772), bringing the equity in the account back to the initial $6000 required margin level.

April 7

Customer answers the margin call by depositing $2772.Gasoline prices make a slight recovery.Equity rises to $6336

April 10

The price of gasoline continues to rise.The customer's equity increases to $8301.60.He requests that the broker pay him the excess in his margin account, which is $2301.60 (the difference between the initial required margin of $6000 and the current equity of $8301.60).

April 11

Gasoline prices increase.The customer has an unrealized gain of $1436.40, bringing the equity in the account to $7436.40.

April 12

The customer liquidates his position by selling 2 May contracts at 70.11 cents per gallon, realizing a gainfor that day of $932.40.His equity rises to $8368.80.The columns on the right side of Table 2 show this cumulative performance up to this date: he has a net profit of $1898.40.

April 13

The customerwithdraws $3368.80 from his account, leaving only the $5000 he originally used to open his account.

April 18

Customer sells 4 June contracts, requiring an initial margin of $8000 ($2000 x 4).Hence, a margin call of $3000 is issued ($8000 - $5000 = $3000).

April 19

Customer meets his margin callbydepositing $3000.An increase in gasoline prices results in an unrealized loss of $1512.00.The account equity is still above the required $5600 ($1400 x 4) maintenance level, so no margin call is issued

April 20

Gasoline prices continue to surge, causing a further loss of $1898.40.Equity falls to $4589.60, resulting in the broker issuing a margin call for $3410.40 to restore the account equity to the initial required margin level of $8000 ($8000 - $4589.60 = $3410.40).

April 21

The customer cannot meet the margin call and decides to offset his position by buying 4 June contracts at 71.18 cents per gallon, for a gain of $302.40.His remaining equity is $4892, which he requests be paid to him.For the entire month, the customer's trading activity has resulted in a net loss of $1209.60.