Reading 72: Futures Markets and Contracts - LOS c, (Part process, removes, account, exchange, class

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1.In commodity trading, the exchange removes any daily losses from a trader’s account and adds any gains to the trader’s account. This process is known as:

A)   initial margin.

B)   maintenance margin.

C)   marking to market.

D)   variation margin.

2.Which of the following statements best describes marking-to-market of a futures contract? At the:

A)   end of the day, the maintenance margin is increased for traders who lost and decreased for traders who gained.

B)   conclusion of each trade, the gains or losses from all previous trades in the futures contract are tallied.

C)   end of the day, the gains or losses are tallied to the trader's account.

D)   maturity of the futures contract, the gains or losses are tallied to the trader's account.

3.A futures account is marked to market:

A)   daily.

B)   weekly.

C)   only when margin falls below the maintenance margin level.

D)   only when the position is closed out.

4.The practice of adjusting the margin balance in a futures account for the daily change in the futures price is called:

A)   marking to market.

B)   settling up.

C)   the daily call.

D)   a margin call.

5.Which of the following statements regarding the mark to market of a futures account is FALSE? Marking to market of a futures account:

A)   may result in a margin balance above the initial margin amount.

B)   may be done more often than daily.

C)   effectively adjusts the price of the future to the new equilibrium level.

D)   is only done when the settlement price is below the maintenance price.

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答案和详解如下：

1.In commodity trading, the exchange removes any daily losses from a trader’s account and adds any gains to the trader’s account. This process is known as:

A)   initial margin.

B)   maintenance margin.

C)   marking to market.

D)   variation margin.

The correct answer was C)    

To safeguard the clearinghouse, commodity exchanges require traders to settle their accounts on a daily basis. Marking to market is when any loss for the day is deducted from the trader’s account, and any gains are added to the account.

2.Which of the following statements best describes marking-to-market of a futures contract? At the:

A)   end of the day, the maintenance margin is increased for traders who lost and decreased for traders who gained.

B)   conclusion of each trade, the gains or losses from all previous trades in the futures contract are tallied.

C)   end of the day, the gains or losses are tallied to the trader's account.

D)   maturity of the futures contract, the gains or losses are tallied to the trader's account.

The correct answer was C)

Marking-to-market means that, at the end of the day, all gains or losses are tallied to the trader’s account.

3.A futures account is marked to market:

A)   daily.

B)   weekly.

C)   only when margin falls below the maintenance margin level.

D)   only when the position is closed out.

The correct answer was A)

Margin balances are marked to market (adjusted) daily based on the change in settlement price from the previous day.

4.The practice of adjusting the margin balance in a futures account for the daily change in the futures price is called:

A)   marking to market.

B)   settling up.

C)   the daily call.

D)   a margin call.

The correct answer was A)

Marking to market is the practice of adding to or subtracting from the margin balance to adjust for the daily change in the contract value.

5.Which of the following statements regarding the mark to market of a futures account is FALSE? Marking to market of a futures account:

A)   may result in a margin balance above the initial margin amount.

B)   may be done more often than daily.

C)   effectively adjusts the price of the future to the new equilibrium level.

D)   is only done when the settlement price is below the maintenance price.

The correct answer was D)

Futures accounts are marked to market daily based on the new settlement price, which can result in either an addition to or subtraction from the previous margin balance. Under extraordinary circumstances (volatility) the mark to market can be required more frequently. Once the margin is marked to market, the contract is effectively a futures contract at the new settlement price.