CFA Level I · CFA Level I Exam · Forward Commitment and Contingent Claim Features and Instruments
A trader holds a long position in a futures contract. The futures price rises during the day. At the daily settlement, the trader's margin account most likely:
The trader's margin account is credited with the gain. A long futures position profits when the futures price rises, and daily settlement transfers the gain from the short's account to the long's account. Forwards, not futures, usually wait until expiry for settlement.
- Ais credited with the gainCorrect
- Bis debited by the loss
- Cremains unchanged until the contract expires
Explanation
A long futures position gains when the futures price rises. Daily settlement credits that gain to the margin account, and the short is debited. Waiting until expiry is how a forward typically settles, so that option is wrong.
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