An Investor May Be Asked to Put Up More Margin

question 2

Multiple Choice

An investor may be asked to put up more margin if:

• A)the price of the commodity goes up in a long position.
• B)the price of the commodity goes down in a short position.
• C)the price of the commodity goes up in a short position.
• D)the contract has less than one week to run.

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Definitions:

Mutual Agreement

A mutual agreement is an understanding or arrangement made between two or more parties, usually detailed in a formal contract.

Discharge

The release or termination of a person’s duty, debt, or obligation, effectively relieving them from responsibility.

Novation

The act of replacing one obligation with another, essentially altering the parties, terms, or obligations of a contract.

Quilt

A multi-layered textile traditionally composed of a woven cloth top, a layer of batting or wadding, and a woven back, usually stitched together.