NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Derivatives
In a futures contract on a stock index, the amount of money a trader must deposit with the clearing corporation through the broker before taking a position is best described as:
The upfront deposit required before taking a futures position is the initial margin. It acts as collateral against potential losses. Premium applies to options, and brokerage is merely a transaction fee, so neither of them describes the security deposited with the clearing corporation.
- AInitial marginCorrect
- BPremium
- CDividend
- DBrokerage
Explanation
Initial margin is the upfront collateral deposited to cover potential loss on a futures position. Premium is paid only by option buyers to option sellers. Brokerage is a fee for service and does not serve as collateral.
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