FUTURES AND DERIVATIVES

Which of the following is the primary purpose of futures contracts?

•  Speculation

• Risk management

• Investment

• Arbitrage

Which of the following is an example of a derivative?

• Stocks

• Bonds

• Commodities

• Options

What is the main difference between futures and options?

•  Futures have no expiration date, while options do.

• Futures give the buyer the right, but not the obligation, to buy or sell an asset, while options give the buyer the obligation to do so.

• Options have no expiration date, while futures do.

• Futures have a fixed price, while options have a variable price.

What is the initial payment made when entering into a futures contract called?

• Premium

• Margin

• Settlement

• Collateral

Which regulatory body oversees futures and derivatives markets in the United States?

• SEC

• FED

• CFTC

• FINRA

What is the process of settling a futures contract called?

•  Liquidation

• Execution

• Delivery

• Settlement

What is the term used to describe a situation where the futures price exceeds the spot price?

• Contango

• Backwardation

• Arbitrage

• Hedging

Which type of derivative provides protection against adverse price movements in an underlying asset?

• Futures

• Swaps

• Options

• Forwards