Types of Derivatives-Cont’d Futures contracts-Cont’d Futures prices fluctuate everyday. Therefore all contract positions are marked to market at the end of everyday. If net price movements result in gain on a position of the previous day, the customer immediately receives cash in the amount of the gain, and vice versa. As soon as a customer’s account falls below the maintenance margin, the customer receives a margin call to fill up the initial margin. If this is not done immediately, then the broker closes down the position on the market. In effect futures contracts are cancelled everyday and replaced by new contracts with a delivery price equal to the new futures price, i.e. the settlement price at the end of the day.
