CMFAS CM-SIP Derivatives — Futures & Forwards question: Setting the MAINTENANCE margin below the initial margin serves

CMFAS CM-SIPDerivatives — Futures & Forwards

Setting the MAINTENANCE margin below the initial margin serves to:

A ensure the account never needs topping up while the position stays open.
B reduce the notional value of the contract as the margin balance falls.
C allow small adverse moves before a margin call, avoiding constant top-ups.
D refund part of the initial margin to the trader as each trading day closes.

Show the answer and explanation

Answer: C. allow small adverse moves before a margin call, avoiding constant top-ups.

The gap between initial and maintenance margin gives the account room to absorb minor adverse moves; only when the balance falls below maintenance is a margin call issued, back up to the initial level.

Common mistake

Thinking the buffer removes all margin calls or reduces the contract's notional.

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CMFAS CM-SIP Derivatives — Futures & Forwards question: Setting the MAINTENANCE margin below the initial margin serves

Answer: C. allow small adverse moves before a margin call, avoiding constant top-ups.

Common mistake

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CMFAS CM-SIP Derivatives — Futures & Forwards question: Setting the MAINTENANCE margin below the initial margin serves

Answer: C. allow small adverse moves before a margin call, avoiding constant top-ups.

Common mistake

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