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. It ensures that the trader has enough funds to cover potential losses and reduces the risk of default for the exchange. A margin account does not guarantee a minimum margin of profit for the contract holder, allow traders to have more than one contract at once, or hold interest payments until expiration.

The Purpose of a Margin Account for a Futures Contract