Traders in futures markets settle gains and losses each day.
A) by making margin payments.
B) by using settlement-by-offset.
C) in a process called mark-to-market settlement.
D) by making arbitrage payments.

Question

Quizplus · Accepted Answer

Traders in futures markets settle gains and losses each day through mark-to-market settlement, in which profits and losses are calculated based on the difference between the entry price and the daily settlement price. This process ensures that each trader’s account reflects the current market value of their positions. Margin payments may be required to cover losses, but they are not the primary method of settling gains and losses. Settlement-by-offset and arbitrage payments are not relevant to daily settlement in futures markets.

Traders in Futures Markets Settle Gains and Losses Each Day