Skip to content

CFA Level I · CFA Level I Exam · Derivative Instrument and Derivative Market Features

A trader buys one futures contract and posts an initial margin of $4,000 with a maintenance margin of $3,000. The futures price falls so that the account balance drops to $2,500. The trader is most likely required to:

The trader must deposit $1,500. Once the balance falls below the maintenance margin, the variation margin required brings the account back to the initial margin of $4,000, not just to the maintenance level. From $2,500 the shortfall to $4,000 is $1,500.

  1. Adeposit $500 to restore the account to the maintenance margin
  2. Bdeposit $1,500 to restore the account to the initial marginCorrect
  3. Cclose the position, with no deposit permitted

Explanation

Balance of $2,500 is below the $3,000 maintenance margin, so a margin call is issued. The variation margin needed returns the account to the initial margin of $4,000, so the deposit is $4,000 - $2,500 = $1,500. Depositing only $500 would restore maintenance, which is not what is required.

Did you get it right without looking?

One question tells you little. A timed set on Derivative Instrument and Derivative Market Features shows your real accuracy, how long you take and where you lose marks.

Practise Derivative Instrument and Derivative Market FeaturesFree diagnostic mock

More Derivative Instrument and Derivative Market Features questions