Explanation:
Correct Answer: C
Explanation:
With an automatic netting arrangement, the variation margin is the difference between the long and short contract margins.
Thus, the member receives USD 250.
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A member of a commodity exchange holds positions in multiple corn futures contracts over several consecutive days. A corn futures contract represents 5,000 bushels. Information about the futures positions and daily settlement prices is given below:
| Position | Day 1 | Day 2 | Day 3 |
|---|---|---|---|
| Long September 1 corn contract | 4.75 | 4.95 | 4.85 |
| Short December 1 corn contract | 5.00 | 5.15 | 5.10 |
If the exchange has an automatic netting arrangement in place, what is the variation margin for the member at the end of day 2?
A
Member pays USD 750.
B
Member neither pays nor receives any USD.
C
Member receives USD 250.
D
Member receives USD 1,000.
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