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Questions and Answers
What is the gain on the futures position when the stock price rose to Rs.521.20?
What is the gain on the futures position when the stock price rose to Rs.521.20?
- Rs.95,850 (correct)
- Rs.72,500
- Rs.99,300
- Rs.86,400
What is the net cost of shares when the stock price declined to Rs.390 by 20th June?
What is the net cost of shares when the stock price declined to Rs.390 by 20th June?
- Cost of buying shares in cash market multiplied by the number of shares
- Cost of buying shares in cash market minus the gain on futures position
- Just the cost of buying shares in cash market
- Cost of buying shares in cash market plus the loss incurred on futures position (correct)
What happens when an investor takes a long position in a futures contract?
What happens when an investor takes a long position in a futures contract?
- Is exposed to unlimited risks
- Requires immediate settlement
- Guarantees a profit regardless of market movements
- Locks in a price for a planned purchase at a future date (correct)
If an investor makes a loss on their futures position, what is the impact on the net cost of shares?
If an investor makes a loss on their futures position, what is the impact on the net cost of shares?
How does a long position in a futures contract help an investor manage price risk?
How does a long position in a futures contract help an investor manage price risk?
What is the purpose of taking a long hedge using stock futures in this scenario?
What is the purpose of taking a long hedge using stock futures in this scenario?
Why does the individual plan to use bank deposit funds to purchase shares on June 20, 2023?
Why does the individual plan to use bank deposit funds to purchase shares on June 20, 2023?
What does it mean to 'square up your long position' in the futures contract?
What does it mean to 'square up your long position' in the futures contract?
If the stock price declined to Rs.480 by June 20, 2023, what would be the individual's total outlay on purchasing the shares?
If the stock price declined to Rs.480 by June 20, 2023, what would be the individual's total outlay on purchasing the shares?
What is the significance of choosing a futures contract expiring on June 29, 2023?
What is the significance of choosing a futures contract expiring on June 29, 2023?
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