Margin

The exam’s favorite item is a mark-to-market walk-through: given initial and maintenance levels plus a sequence of settlement prices, compute the running balance and identify the day the call is triggered — the balance closing at or below maintenance. The tell is a maintenance level set below initial; the top-up that day brings the account back to the initial level, and the funds posted are often called variation margin (some sources reserve that term for the daily mark-to-market cash flow that flows both ways). A move in your favor credits the account, and you may withdraw the excess above initial rather than leave it idle.

The classic trap is importing equity-margin logic: here there is no borrowing and no interest charged, so the deposit is a good-faith bond, not financed leverage. Don’t confuse margin (the collateral mechanism) with the futures contract itself or with a hedge (the risk-offsetting purpose) — margin is what makes the clearinghouse’s performance guarantee credible. Memory hook: maintenance is the floor; touch it and you climb the whole ladder back to initial.