Logan Sold a Corn Futures Contract Using the Initial Margin

question 25

Multiple Choice

Logan sold a corn futures contract using the initial margin of $2,700.His maintenance margin is $2,000.The price of began to rise in early summer, but Logan wants to keep his contract.When his margin falls below $2,000 (minimum maintenance)

• A)his contract will be automatically sold or canceled.
• B)he does not need to do anything since the most he can lose is $2,700.
• C)he will need to deposit at least $700 with his broker to bring his margin back up to the initial deposit.
• D)he will need to deliver the corn immediately.

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Definitions:

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An investment portfolio that contains a mix of assets with different characteristics like stocks, bonds, and commodities to minimize risks.

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Exchange-Traded Funds, investment funds that are traded on stock exchanges much like stocks and typically track an index, a commodity, bonds, or a basket of assets.

Russell 2000

An index measuring the performance of approximately 2,000 smallest-cap American companies in the Russell 3000 Index, which represents the entire U.S. stock market.

Diversified Portfolio

A financial approach that diversifies holdings over multiple asset types to mitigate risk.