Understanding Futures Trading and Margin

What is the primary reason traders are attracted to futures trading?

• Low transaction fees

• Leverage

• Guaranteed profits

• No risk involved

How does margin in futures trading differ from margin in stock trading?

• Margin in futures is higher than in stocks

• Margin in futures is a good faith deposit

• Margin in futures is a loan against assets

• Margin in futures is not required

What is the notional value of an E-Mini S&P 500 index futures contract if ES is trading at 2,800?

• $14,000

• $28,000

• $140,000

• $280,000

What percentage of the contract's notional value is typically required as initial margin?

• 1% to 5%

• 3% to 12%

• 15% to 20%

• 25% to 30%

What happens if a trader's account balance falls below the maintenance margin?

• The trader automatically loses the position

• The trader is charged a penalty fee

• The trader receives a margin call

• The trader's position is doubled

What is the maintenance margin requirement typically set at compared to the initial margin?

• 90% of the initial margin

• 110% of the initial margin

• Equal to the initial margin

• 50% of the initial margin

How much did Trader A's account balance increase when the S&P 500 rallied 20 points?

• $500

• $1,000

• $1,500

• $750

What was Trader B's final account balance after closing the trade?

• $5,500

• $6,250

• $5,750

• $5,250

What is the return percentage for Trader A after closing the trade?

• 6.5%

• 3.5%

• 4.5%

• 5.5%

What is the key takeaway regarding gains or losses in futures trading?

• They are always predictable

• They are always less than the initial margin

• They can exceed the initial margin requirement

• They are fixed and do not change