Podcast
Questions and Answers
Which one of the following best describes a long forward position?
Which one of the following best describes a long forward position?
- Having exposure to the price of an asset and taking a position in a derivative to offset the exposure
- Agreeing to sell the underlying asset at a certain price in the future
- Betting on the future movements in the price of an asset
- Agreeing to buy the underlying asset at a certain price in the future (correct)
Which one of the following best describes arbitrage?
Which one of the following best describes arbitrage?
- Giving someone else the right to buy an asset from you
- Taking a position in two or more different markets to lock in a profit (correct)
- Betting on the future movements in the price of an asset
- Taking a position in a derivative to offset exposure to the price of an asset
What is the difference between selling a call option and buying a put option?
What is the difference between selling a call option and buying a put option?
- Buying a put option involves buying an option from someone else
- Both involve giving someone else the right to buy an asset from you
- Both involve buying an option from someone else
- Selling a call option involves giving someone else the right to buy an asset from you (correct)
According to the text, when you buy a put option, the payoff is
According to the text, when you buy a put option, the payoff is
In problem 1.6, if the cotton price at the end of the contract is 48.20 cents per pound, how much does the trader gain or lose?
In problem 1.6, if the cotton price at the end of the contract is 48.20 cents per pound, how much does the trader gain or lose?
Which market quotes prices as the number of US dollars per unit of foreign currency?
Which market quotes prices as the number of US dollars per unit of foreign currency?
What is the purpose of margins in futures contracts?
What is the purpose of margins in futures contracts?
What are the most important aspects of designing a new futures contract?
What are the most important aspects of designing a new futures contract?
What does a stop order to sell at $2 mean?
What does a stop order to sell at $2 mean?
Which of the following is true about an exchange-traded stock option?
Which of the following is true about an exchange-traded stock option?
What is the purpose of a futures contract?
What is the purpose of a futures contract?
Under what circumstances will the holder of a March call option to buy a share for $50 make a profit?
Under what circumstances will the holder of a March call option to buy a share for $50 make a profit?
Under what circumstances will the seller of a June put option to sell a share for $60 make a profit?
Under what circumstances will the seller of a June put option to sell a share for $60 make a profit?
According to the text, if the futures price of a commodity is greater than the spot price during the delivery period, what can an arbitrageur do to make an immediate profit?
According to the text, if the futures price of a commodity is greater than the spot price during the delivery period, what can an arbitrageur do to make an immediate profit?
What happens if the futures price is less than the spot price during the delivery period?
What happens if the futures price is less than the spot price during the delivery period?
What strategy may companies interested in acquiring the asset use if the futures price is less than the spot price during the delivery period?
What strategy may companies interested in acquiring the asset use if the futures price is less than the spot price during the delivery period?
What is the total payoff from the two contracts entered into on July 1, 2011 and September 1, 2011?
What is the total payoff from the two contracts entered into on July 1, 2011 and September 1, 2011?
What is the open interest of a futures contract?
What is the open interest of a futures contract?
Which of the following is a way to hedge exchange rate risk for a US company that expects to pay 1 million Canadian dollars in six months?
Which of the following is a way to hedge exchange rate risk for a US company that expects to pay 1 million Canadian dollars in six months?
If the exchange rate at the end of a short forward contract on 100 million yen is $0.0074 per yen, how much does the trader gain or lose?
If the exchange rate at the end of a short forward contract on 100 million yen is $0.0074 per yen, how much does the trader gain or lose?
Which of the following is NOT a likely reason for investors to use a futures contract on long-term Treasury bonds?
Which of the following is NOT a likely reason for investors to use a futures contract on long-term Treasury bonds?
What does it mean when someone says that options and futures are zero-sum games?
What does it mean when someone says that options and futures are zero-sum games?
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