Multiple choice general knowledge

Margins in futures trading:

  1. serve the same purpose as margins for common stock.

  2. limit the use of credit in buying commodities

  3. serve as a down payment.

  4. serve as a performance bond.

  5. are required only for long positions.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Margins in futures trading serve as performance bonds, ensuring traders can cover potential losses. Unlike stock margins, futures margins are not down payments or loans for purchase. They're deposits demonstrating financial capability to fulfill obligations. Both long and short positions require margins, and they don't limit credit but rather ensure contract performance.

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