Practice Quiz

Financial Planner

Category - Investment Planning

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Futures contracts are settled daily and traders are required to realize losses in cash on a daily basis, but to purchase futures contract requires what type of account?
  1. Tangible Account
  2. Margin Account
  3. Natural Resource Account
  4. Separately Managed Account
Explanation
Answer: B - To purchase futures contract requires a margin account; it must have an initial deposit and a required minimum balance. Futures contracts are settled daily (called marking-to-market). Traders are required to realize losses in cash on a daily basis. If the futures contract increase, the investor is permitted to withdraw the increase in the margin account. If the contract decreases in value below the maintenance margin, the investor must deposit cash or securities to restore the initial margin level.
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