New SIDBI Grade A New Batch Starts on Nov 18

    Register

    Question

      With respect to the futures transactions, the purpose of margin is to ________

    A Make trades easier Correct Answer Incorrect Answer
    B Reduce price risk for futures investors Correct Answer Incorrect Answer
    C Provide security to the clearinghouse Correct Answer Incorrect Answer
    D All of the above Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Futures contract is an exchange-traded contract to buy or sell an underlying asset at a future date at an agreed price . A margin account has to be opened by both parties of the futures contract, when opening a futures contract where a margin i.e. an amount of money is to be deposited with the clearing house by both the parties. This margin is like a security to the clearinghouse and it serves to ensure traders will fulfil their obligations.

    Practice Next