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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Derivatives

In an equity futures contract, the amount that a trader must deposit with the clearing corporation through the broker at the time of taking a position, to cover potential losses, is called:

The deposit collected at the start of a futures position is the initial margin. It protects the clearing corporation against potential losses from adverse price moves. Premium is paid only for options, while dividend yield and face value are unrelated to margining.

  1. AInitial marginCorrect
  2. BPremium
  3. CDividend yield
  4. DFace value

Explanation

Futures positions carry no premium. Instead, the clearing corporation collects initial margin to cover potential adverse price movements, and daily mark-to-market settlement follows. Premium applies to options buyers only.

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