Futures Final
if I expect to get 2.90 and basis is 8 cents weaker than expected, actual price is
2.82
the top foreign holder of US debt is
China
why is the system of trading on margin practiced in futures markets
to reduce risk of default on futures contracts
futures contracts are characterized by:
- exchange traded - daily settlement - market liquidity - standardization
which of the following financial futures contracts are traded in the US
- interest rates - stock indexes - currencies
competitive futures markets are characterized by
- numerous participants - homogeneity of the product - free mobility of resources - perfect information
I am a buyer in the cash market, if basis is stronger than expected,
I will pay more than expected
who is the chairman of the federal reserve
Jerome Powell
want to hedge corn prices in January, when should you place the hedge?
March futures
the seller of an option will be assigned
a short position in the underlying futures
the elimination of riskless profit opportunities is known as
arbitrage
if they build an ethanol plant in my area, I can expect
basis to get stronger
if a trader is long a futures contract, they
bought
prices fall, and basis gets weaker, this means
cash prices fall faster than futures prices
one of the economic functions of futures markets is to
discover prices
a yield curve with a negative slope implies
economic recession
one of the traditional objectives of exchanges is to
enforce rules and regulations
one of the first cash settled contracts in the fed fund futures market is
eurodollars
the most actively traded financial futures contract in the US is
eurodollars
a buyer of a put option has the right to go long in the futures market, at the specified strike price
false
a futures contract is not legally binding
false
a limit order is executed at the market
false
an option seller has the right to exercise an option at the strike price
false
gains or losses in a futures account are not real until the position is liquidated or closed-out
false
hedging could be defined as a risk management procedure that increases price risk to basis risk
false
if a trader is bearish prices, then they will sell, or get short position in a futures contract
false
more than 20 percent of futures contracts result in delivery of the underlying commodity
false
the 'theory of random walk' says forthcoming future prices are predictable from past prices
false
the bid price is the price at which you can immediately buy
false
the first transaction that a trader makes in the futures market must be a buy or purchase
false
the initial margin required to trade futures is usually 75 percent of the total contract value
false
which of the following are true
futures contracts are traded on exchanges, but forward contracts are not
the current price of a t-bond contract is 94, yesterday it was 94.5. this means interest rates have
gone up
futures contracts seldom lead to the delivery of the underlying asset because:
holders of contracts reverse the contracts before the delivery date
the futures price
is set by supply and demand in the futures market
hedgers
manage risk in the market. they are producers of the commodity looking to decrease risk by taking opposite positions in the market
suppose you have a long at 10, what order would you use to liquidate that position immediately
market order to sell
all of the following are roles of a clearinghouse except
reducing the default risk involving forward contracts
financial futures contracts are regulated by
the Commodity Futures Trading Commission
volume
the amount of contracts traded on a particular day
when a contract is marked-to-market
the margins account of the contract holder is adjusted to reflect changes in underlying market
the open interest column of futures tables in the WSJ gives
the number of contracts outstanding
open interest
the number of shorts or longs in the market
the size of the initial margin payable on a futures contract is related to
the volatility of the price of the underlying asset
currently
trading in financial futures involves more transactions than trading in commodities
I have a legal obligation to accept delivery
true
a futures contract is a derivative
true
according to the purchasing power parity theory of exchange rates between two countries should be the same as the ratio of the price levels of the two countries
true
cash settlement is an alternative to a delivery settles futures contract
true
cash settlement works well for markets in which delivery is difficult
true
cost of carry rule applies to commodities such as Euros
true
electronic trading has replaced the traditional open outcry method of futures trading
true
end-users are short the cash, long the futures
true
forward contracts are negotiated between two private individuals, and they are commonly referred to as off-exchange derivatives
true
futures contracts are highly standardized
true
one of the functions of futures contracts is to facilitate risk management
true
the clearing house guarantees the financial integrity of the futures market
true
the maintenance margin is usually 75 percent of the initial margin
true
speculators
try to make money in the market. they do not own the commodity
the maximum potential loss for the seller of a futures option is
unlimited
a trader who purchases soybean futures based on their interpretation of the USDA crop report is
using fundamental analysis
an increase in transportation costs would be expected to
weaken the basis
if you hedge by purchasing a futures contract, a good time to lift the hedge is
when basis is relatively weak