Futures Contracts Quiz

What is a futures contract?

• A type of stock

• A loan agreement

• An agreement to buy or sell an asset at a future date for a certain price

• A type of insurance

Which of the following is a characteristic of futures contracts?

• They are always customized

• They have no expiration date

• They are traded on exchanges

• They are only for commodities

What is the primary purpose of a futures contract?

• To hedge against risk or speculate on price changes

• To insure assets

• To provide loans

• To create stocks

What is the term for the quantity of assets to be delivered under a futures contract?

• Delivery size

• Margin

• Lot size

• Contract size

What is the expiration date for futures contracts typically set to?

• Last Thursday of every month

• First Monday of every month

• Last day of the year

• First day of the month

In a futures contract, what position does the buyer assume?

• Margin position

• Neutral position

• Short position

• Long position

What happens if the spot price at maturity is lower than the futures price for the buyer?

• The buyer incurs a loss

• The buyer makes a profit

• The contract is void

• The buyer breaks even

What is the payoff formula for the buyer of a long futures contract?

• Payoff = Futures Price at Maturity - Spot Price at Initiation

• Payoff = Spot Price at Initiation - Futures Price at Maturity

• Payoff = Spot Price at Maturity - Futures Price at Initiation

• Payoff = Futures Price at Initiation - Spot Price at Maturity

What is the role of a clearing house in futures contracts?

• To insure futures contracts

• To provide loans

• To set prices for futures contracts

• To act as an intermediary between buyers and sellers

What is the initial margin in futures trading?

• The deposit required to open a futures contract

• The total value of the contract

• The profit made from the contract

• The minimum balance required in a margin account