Question 7 A company enters into a short futures contract to sell 50,000 units of a commodity for 70 cents per unit. The initial margin is $4,000 and the maintenance margin is $3,000. What is the futures price per unit above which there will be a margin call?

The open interest in a futures contract changes from day to day. Suppose investors holding long positions are divided into two groups: A is an individual investor and OL represents other investors. Investors holding short positions are denoted as S. Currently, A holds 1,000 contracts and OL holds 4,200; thus, S is short 5,200 contracts. Determine the holdings of A, OL, and S after each of the following transactions. Treat each transaction independently. For example, the transaction in b ignores the transaction in a.

a. A sells 500 contracts; OL buys 500 contracts

b. A buys 700 contracts; OL sells 700 contracts

c. A buys 200 contracts; S sells 200 contracts

d. A sells 800 contracts; S buys 800 contracts

What determines whether new volume increases or decreases the open interest?