The process of marking a futures contract to market means that:
A)The profitability of the contract is locked in from the onset of the contract
B)The amount of commodity to be delivered changes as prices change
C)Contracts are closed out as soon as they become unprofitable
D)Profits or losses are posted to the contract daily

Question

Quizplus · Accepted Answer

Marking a futures contract to market means that profits or losses are posted to the contract daily according to changes in the price of the underlying asset. This allows traders to keep track of their performance and adjust their positions accordingly. A is incorrect because profitability is not locked in at the onset of the contract - it fluctuates based on market conditions. B is incorrect because the amount of commodity to be delivered is set at the outset of the contract and does not change. C is incorrect because contracts are not necessarily closed out as soon as they become unprofitable - traders may choose to hold onto losing positions in the hope of turning a profit in the future.

The Process of Marking a Futures Contract to Market Means