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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Sales Practices and Investors Protection Services

Under the risk disclosure practices for derivatives, which statement about a client's margin position is correct?

A client may be required to deposit additional funds when adverse price moves erode margin, and the member can close positions if the shortfall is not met. Margin is not refunded on MTM losses, option sellers do face margin, and daily settlement covers both gains and losses.

  1. AThe client may need to pay additional funds if adverse price movement erodes margin, and positions may be closed if not metCorrect
  2. BInitial margin is refunded immediately when MTM losses occur
  3. CMargin is never required for option buyers or sellers
  4. DOnly profits, not losses, are settled daily on futures

Explanation

Futures are marked to market daily, and losses must be covered by margin. If the margin falls short, the member may demand more funds or square off positions. Option sellers pay margin, and both profits and losses are settled daily on futures.

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