Reading 72: Futures Markets and Contracts - LOS b, (Part statements, following, regarding, contract, black

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1.Which of the following statements regarding a futures trade of a deliverable contract is FALSE?

A)   The long is obligated to purchase the asset.

B)   The short is obligated to deliver the asset.

C)   Equilibrium futures price is known only at the end of the trading day.

D)   The price is determined by open outcry.

2.The initiation of a futures position:

A)   requires both a buyer and a seller.

B)   is done through a bank or other large financial institution acting as a dealer.

C)   is at a price negotiated between the buyer and seller.

D)   is often done with a futures dealer when the asset is not standard.

3.In the trading of futures contracts, the role of the clearinghouse is to:

A)   stabilize the market price fluctuations of the underlying commodity.

B)   guarantee that all obligations by traders, as set forth in the contract, will be honored.

C)   initiate trades in commodity futures that are being ignored by private investors.

D)   maintain private insurance that can be used to provide funds if a trader defaults.

4.The money added to a margin account to bring the account back up to the required level is known as the:

A)   maintenance margin.

B)   daily settlement.

C)   variation margin.

D)   initial margin.

5.When a futures trader receives a margin call what must he or she do to bring the position up to the initial margin? The futures trader must:

A)   deposit maintenance margin.

B)   deposit the daily settlement value.

C)   deposit variation margin.

D)   sell stock to cover the margin call.

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答案和详解如下：

1.Which of the following statements regarding a futures trade of a deliverable contract is FALSE?

A)   The long is obligated to purchase the asset.

B)   The short is obligated to deliver the asset.

C)   Equilibrium futures price is known only at the end of the trading day.

D)   The price is determined by open outcry.

The correct answer was C)

Each trade is made at the then current equilibrium price, determined by open outcry on the floor of the exchange, and is reported as it is executed. The long is obligated to buy, and the short is obligated to sell, the specified quantity of the underlying asset.

2.The initiation of a futures position:

A)   requires both a buyer and a seller.

B)   is done through a bank or other large financial institution acting as a dealer.

C)   is at a price negotiated between the buyer and seller.

D)   is often done with a futures dealer when the asset is not standard.

The correct answer was A)

Futures trades are done through open outcry on the futures exchange and require a buyer (long) and a seller (short) for a trade to take place. The other statements are generally true for forward contracts, which are all individually negotiated.

3.In the trading of futures contracts, the role of the clearinghouse is to:

A)   stabilize the market price fluctuations of the underlying commodity.

B)   guarantee that all obligations by traders, as set forth in the contract, will be honored.

C)   initiate trades in commodity futures that are being ignored by private investors.

D)   maintain private insurance that can be used to provide funds if a trader defaults.

The correct answer was B)

The clearinghouse does not originate trades, it acts as the opposite party to all trades. In other words, it is the buyer to every seller and the seller to every buyer. This action guarantees that all obligations under the terms of the contract will be fulfilled.

4.The money added to a margin account to bring the account back up to the required level is known as the:

A)   maintenance margin.

B)   daily settlement.

C)   variation margin.

D)   initial margin.

The correct answer was C)

The money added to a margin account to bring the account back up to the required level is known as the variation margin. The first deposit is called the initial margin. The minimum allowed in the account is called the maintenance margin. The daily settlement process requires marking-to-market each day.

5.When a futures trader receives a margin call what must he or she do to bring the position up to the initial margin? The futures trader must:

A)   deposit maintenance margin.

B)   deposit the daily settlement value.

C)   deposit variation margin.

D)   sell stock to cover the margin call.

The correct answer was C)

When a futures trader receives a margin call, he/she must deposit variation margin to bring the account up to the initial margin value.