NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Derivatives
Which statement about the margin system for index futures is correct?
Initial margin is collected upfront on futures positions and they are marked to market every day. Both buyers and sellers pay margin, it is not collected only at expiry, and a hedge purpose does not exempt a position from margin.
- AInitial margin is collected upfront and positions are marked to market dailyCorrect
- BNo margin is required if the position is a hedge
- CMargin is collected only on the expiry day
- DOnly the seller of futures pays margin
Explanation
Clearing corporations collect initial margin when a position is opened and settle mark-to-market gains and losses daily. Both buyers and sellers of futures pay margins, and hedged positions are not exempt, though offsetting positions may get margin benefits.
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