Suppose that an investor enters a long position in futures on date 0. If the futures...

Suppose that an investor enters a long position in futures on date 0. If the futures price increases on date 1, the investor's margin account balance will increase.

Group of answer choices

True

False

Solutions

Expert Solution

True

Initial margin is the amount of money a futures trader need to deposit and maintain in his futures trading account in order to open a futures position.
As futures contracts are settled at the end of each day (known as marking to market), profits are added and losses are deducted from this initial margin amount. when it is long position, he benefits from increase in the price and therefore the incremental value is added to the initial margin account which increases in value.

jeff jeffy answered 1 year ago

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