A futures trader takes a long position of 10 contracts. The initial margin requirement is $10 per contract and the maintenance margin requirement is $7 per contract. She deposits the required initial margin on the trade date. On Day 3, her margin account balance is $40. What is the variation margin on Day 4?
B is correct because on any day when the balance in the margin account falls below the maintenance margin, the trader must deposit sufficient funds to bring the balance back up to the initial margin requirement. This additional amount is called the “variation margin.” Therefore, $100 – $40 = $60 variation margin.