The purpose of a margin account for a futures contract is to:
A)Guarantee a minimum margin of profit for the contract holder
B)Allow futures traders to have more than one contract at once
C)Provide a cushion for the exchange against defaults on the contract
D)Hold interest payments until expiration

Question

Quizplus · Accepted Answer

The purpose of a margin account for a futures contract is to provide a cushion for the exchange against defaults on the contract. This means that if the contract holder is unable to fulfill their obligations, the margin account can be used to cover the losses incurred by the exchange. It does not guarantee a minimum margin of profit for the contract holder, allow for multiple contracts at once, or hold interest payments until expiration.

The Purpose of a Margin Account for a Futures Contract