CIRO Derivatives Exam Practice Questions - CIRO Derivatives Exam

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An investor holds a long position in a gold futures contract on the Montréal Exchange. If the settlement price increases, what is the immediate effect on the investor's margin account under the mark-to-market process?

The margin account is credited with the cash gain, which is available for withdrawal. The gain is recorded as paper profit but cannot be withdrawn until contract expiration. The gain reduces the initial margin requirement but does not change the account cash balance. The gain is credited only if the investor closes out the position prior to the end of the day.

Correct Answer:

The margin account is credited with the cash gain, which is available for withdrawal.

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