CFA Level I · CFA Level I Exam · Derivative Instrument and Derivative Market Features
A futures contract is marked to market daily. An investor holds a long position in 10 contracts, each with a multiplier of 100 units. The settlement price moves from 52.00 to 51.20 today. The investor's margin account is most likely:
The account is debited by 800. The long position loses 0.80 per unit on 10 contracts of 100 units each, which is 0.80 × 1,000 = 800. Falling prices hurt long holders, so the loss is deducted from the margin account.
- Acredited with 800
- Bdebited by 80
- Cdebited by 800Correct
Explanation
The price fell 0.80 per unit. Loss = 0.80 × 100 × 10 = 800. A long position loses when price falls, so the account is debited by 800. Debiting 80 forgets the multiplier of 10 contracts' units, and crediting has the wrong sign.
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