medium · FRM Part 1 Financial Markets and Products
The 'initial margin' in futures trading is often compared to a good-faith deposit.
Why is it NOT considered a down payment?
- Because it is required only for traders who take on short futures positions
- Because the full notional value of the asset is not being transferred at inception
- Because it is paid gradually in installments spread out across the life of the contract
- Because the funds are held in escrow by the exchange, not paid to the seller
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