chapter 10 part 3

Question 1

How do margins work for futures contracts?

Answer 1

There are two types of margins initial margin and maintenance margin.

Question 2

what is marking-to-market?

Answer 2

at the end of each trading day margins must be balanced depending if the underlying asset is up or down. the long or short must transfer money to each other accordingly

Question 3

what are rights and warrents?

Answer 3

like a option but issued by company’s as a way of raising capital. Rights are short term usually 4-6 weeks. Warrants and call options can be 3-5 years.

Question 4

What are rights?

Answer 4

a company gives share holders more shares. There is a record date. cum rights and a ex rights. generally given at a lower price then market.

Question 5

how many days for transaction of rights to take place?

Answer 5

it is settled on the third day after transaction. term regular delivery. on tsx rights are traded on a cash basis.

Question 6

what is a warrent?

Answer 6

a warrant gives the investor a right to buy shares in a company at a specific date for a period of time. Same as call options except for issued by the company. normally offered with new shares as a sweetener