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Questions and Answers
Which of the following statements about the deposit on a futures contract is true?
Which of the following statements about the deposit on a futures contract is true?
- It is always higher for the sellers of futures contracts
- It is determined by regulatory authorities after they have consulted the operators of the market
- It cannot be lower than 30% of the contract’s value, to limit the leverage effect and the speculation
- It changes with the volatility of the underlying asset (correct)
What is backwardation in futures trading?
What is backwardation in futures trading?
- The difference between the futures and the spot prices is equal to storage costs
- The convenience yield is high
- The futures price is higher than the spot price (correct)
- The temporal basis is negative
Which of the following is NOT true about backwardation?
Which of the following is NOT true about backwardation?
- The storage cost of the commodity is zero
- The convenience yield is low
- The speculator is systematically rewarded
- The temporal basis is positive (correct)
Which of the following is true about the deposit on a futures contract?
Which of the following is true about the deposit on a futures contract?
What is backwardation in futures trading?
What is backwardation in futures trading?
Which of the following statements about backwardation is true?
Which of the following statements about backwardation is true?
Which of the following best represents the open interest on a futures market?
Which of the following best represents the open interest on a futures market?
Which of the following is considered the most important underlying asset on organized markets for derivative products?
Which of the following is considered the most important underlying asset on organized markets for derivative products?
What does the operation of cash and carry in futures trading involve?
What does the operation of cash and carry in futures trading involve?
Which of the following is true about the deposit on a futures contract?
Which of the following is true about the deposit on a futures contract?
What is backwardation in futures trading?
What is backwardation in futures trading?
Which of the following is NOT true about backwardation?
Which of the following is NOT true about backwardation?
Which of the following best represents the open interest on a futures market?
Which of the following best represents the open interest on a futures market?
What does the operation of cash and carry in futures trading involve?
What does the operation of cash and carry in futures trading involve?
Which of the following is considered the most important underlying asset on organized markets for derivative products?
Which of the following is considered the most important underlying asset on organized markets for derivative products?
Which of the following regions gather roughly 50% of the total volume traded on organized markets for derivative products?
Which of the following regions gather roughly 50% of the total volume traded on organized markets for derivative products?
Which of the following is true about the deposit on a futures contract?
Which of the following is true about the deposit on a futures contract?
What is backwardation in futures trading?
What is backwardation in futures trading?
Which of the following is NOT true about backwardation?
Which of the following is NOT true about backwardation?
Which of the following represents the open interest on a futures market?
Which of the following represents the open interest on a futures market?
What is the operation of cash and carry in futures trading?
What is the operation of cash and carry in futures trading?
Which regions gather roughly 50% of the total volume traded on organized markets for derivative products?
Which regions gather roughly 50% of the total volume traded on organized markets for derivative products?
To liquidate a short position in the copper futures market of the London Metal Exchange (LME) for the month of July, what must an operator do?
To liquidate a short position in the copper futures market of the London Metal Exchange (LME) for the month of July, what must an operator do?
Which of the following is true about the deposit on a futures contract?
Which of the following is true about the deposit on a futures contract?
What is backwardation in futures trading?
What is backwardation in futures trading?
Which of the following best represents the open interest on a futures market?
Which of the following best represents the open interest on a futures market?
Which of the following best represents the open interest on a futures market?
Which of the following best represents the open interest on a futures market?
What does the operation of cash and carry in futures trading involve?
What does the operation of cash and carry in futures trading involve?
Which of the following regions gather roughly 50% of the total volume traded on organized markets for derivative products?
Which of the following regions gather roughly 50% of the total volume traded on organized markets for derivative products?
To liquidate a short position in the copper futures market of the London Metal Exchange (LME) for the month of July, what must an operator do?
To liquidate a short position in the copper futures market of the London Metal Exchange (LME) for the month of July, what must an operator do?
Study Notes
Futures Contract Deposit
- A deposit on a futures contract is a good faith deposit to ensure contractual obligations are met
- The deposit is not the full payment for the underlying asset
Backwardation
- Backwardation is a situation where the spot price of a commodity is higher than its futures price
- It is the opposite of contango, where the futures price is higher than the spot price
- Backwardation is NOT a situation where the futures price is higher than the spot price
Open Interest
- Open interest on a futures market represents the total number of outstanding contracts
Important Underlying Asset
- The most important underlying asset on organized markets for derivative products is currencies
Cash and Carry
- Cash and carry involves buying a commodity at the spot price and selling a futures contract to lock in a profit
Futures Trading
- To liquidate a short position in the copper futures market of the London Metal Exchange (LME) for a specific month, an operator must buy back the same quantity of copper futures contracts for that month
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Description
Test your knowledge on the deposit requirements for futures contracts with this quiz. Learn about the role of the deposit, who determines it, and whether it is higher for buyers or sellers.
