When a position is first taken in a futures contract, the investor must deposit a minimum dollar amount per contract as specified by:
A) The Federal Reserve.
B) The pit trader.
C) The exchange.
D) An informal agreement between the parties involved.
E) None of the above.

Question

Quizplus · Accepted Answer

The exchange specifies the minimum dollar amount per contract that must be deposited when a position is first taken in a futures contract. This is known as the initial margin requirement, and it is set by the exchange to ensure that investors have enough skin in the game to cover potential losses.

When a Position Is First Taken in a Futures Contract