What is the purpose of an initial margin on a futures exchange?
A) To cover losses incurred between variation margin payments
B) To exclude retail investors
C) To pay reserve requirements
D) To cover fees due to the clearing house

Question

Quizplus · Accepted Answer

The purpose of an initial margin on a futures exchange is to cover any potential losses that may occur between the time the trade is made and the first variation margin payment is due. This is necessary to ensure that the trading parties are able to meet their obligations and to protect the integrity of the market.

What Is the Purpose of an Initial Margin on a Futures