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