Futures Contracts Quiz

A financial instrument whose value is derived from the value of an underlying asset. Examples include futures, options, and forwards.

A market where derivatives are traded. Allows for the transfer of risk and price discovery.

A financial instrument that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a certain date.

A contract that obligates two parties to buy or sell an underlying asset at a predetermined price on a specific date.

A contract that is customized between two parties to buy or sell an underlying asset at a specific price on a specific date.

A financial index that tracks the performance of a group of assets, such as stocks or bonds.

The weighted average of prices of a group of stocks representing a particular market segment or the entire market.

The right to buy an underlying asset at a specific price on or before a certain date.

The right to sell an underlying asset at a specific price on or before a certain date.

A type of derivative that is used to hedge against price fluctuations in an underlying asset.

A type of derivative that is used to speculate on the price movements of an underlying asset.

A financial instrument that allows investors to buy or sell a basket of stocks, bonds, or other assets.

The difference between the current market price of an underlying asset and the strike price of an option.

The additional value of an option beyond its intrinsic value, reflecting the time remaining until expiration and the potential for price fluctuations.

A measure of the potential change in the price of an option for a given change in the price of the underlying asset.

A measure of the potential change in the price of an option for a given change in the time remaining until expiration.

The process of ensuring an index remains relevant and representative of the market by adjusting its composition based on corporate actions, such as stock splits, dividends, and mergers.

A periodic review of an index to add or remove securities, ensuring it reflects the most dynamic companies and accurately portrays the market.

A group of specialists responsible for deciding which securities to include or remove from an index.

Financial instruments that derive their value from an underlying index.

Mutual funds that aim to replicate the performance of a specific market index.

A measure of the overall performance of a set of securities, often used as a benchmark for the stock market.

The difference in returns between an index fund and the actual index it tracks.

A set of pre-determined rules that define which securities are eligible for inclusion in a stock market index.

The risk that a party to a contract will not fulfill their obligations, resulting in financial loss for the other party.

The party in a futures contract who agrees to buy the underlying asset at a future date.

The party in a futures contract who agrees to sell the underlying asset at a future date.

The risk that a party in a futures contract will not be able to fulfill their obligations due to insufficient funds or other reasons.

The underlying asset traded in a futures contract, such as a stock or index.

The price at which the underlying instrument is traded in the cash market.

The minimum price movement allowed for a futures contract.

The standardized quantity of the underlying asset traded in one futures contract.

Features of a futures contract, including the contract maturity, contract multiplier, and tick size.

An exchange that provides a centralized platform for trading futures contracts.

A method of settling futures contracts daily based on the difference between the previous day's closing price and the current price.

Payments made by both parties to a futures contract to cover potential losses.

The total quantity of futures contracts that a trader holds, both long and short.

A long or short position in a futures contract without holding the underlying asset.

Holding long and short positions on the same underlying asset with different maturities.

Opening a futures contract increases the client's open position.

Closing a futures contract reduces the client's open position.

A long or short position which remains active or open across trading days.

The assumption that the underlying asset is available in sufficient quantities to buy or sell without significantly impacting its price.

The assumption that the underlying asset's demand and supply are not influenced by seasonal factors, meaning prices remain relatively stable throughout the year.

The assumption that the underlying asset can be easily stored and maintained without significant costs or complications.

The assumption that the underlying asset can be sold short, meaning investors can profit from a decrease in its price.

The assumption that there are no costs associated with buying, selling, or holding the underlying asset.

The assumption that there are no taxes imposed on any transaction related to the underlying asset.

The assumption that there are no margin requirements for trading the underlying asset, meaning investors don't need to put down a deposit to open a position.

A measure of the benefit received from holding a physical asset rather than its futures contract, representing advantages like control over the asset and potential for early profit.