CMFAS CM-SIP Trading, Clearing & Settlement question: member's open futures

CMFAS CM-SIPTrading, Clearing & Settlement

A member's open futures position is 'marked to market'. What does this mean?

A The position is physically delivered at the marked price at the end of each day
B The position is revalued only at close-out, with gains and losses settled then
C The member's initial margin is refunded each day and posted again the next morning
D It is revalued at the current price and the gain or loss is paid via variation margin

Show the answer and explanation

Answer: D. It is revalued at the current price and the gain or loss is paid via variation margin

Marking to market revalues the position at the current market price (often daily or intraday) and the losing side pays the gain to the winning side through variation margin, so unrealised losses do not accumulate.

Common mistake

Believing revaluation happens only at close-out, or confusing mark-to-market flows with a refund of initial margin.

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CMFAS CM-SIP Trading, Clearing & Settlement question: member's open futures

Answer: D. It is revalued at the current price and the gain or loss is paid via variation margin

Common mistake

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CMFAS CM-SIP Trading, Clearing & Settlement question: member's open futures

Answer: D. It is revalued at the current price and the gain or loss is paid via variation margin

Common mistake

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