Delivery and Settlement Flashcards
Taking into account offsetting position, as a contract approaches delivery, which of the following types of margin is triggered?
Spot month margin
Which of the following is a suitable settlement method for a contract for difference?
Cash
In relation to a holder deciding to exercise an option, which of the following would occur first?
The broker completes an exercise notice and forwards it to the clearing house
On ICE Futures, when is the last notice day for the trading of the long UK government future?
The end of the last trading day
Which of the following can initiate an assignment notice?
The holders of put and call options
Who pays the invoice amount?
The long pays it to the clearing house
A far out-of-the-money option is likely to:
To the customer with the largest short-position
A warrant on LME:
Gives right of possession to a specific lot of deliverable metal
If a member of a clearing house has elected for automatic exercise, how would they prevent the exercise of a particular option?
Suppression notice
Once a salesman has confirmed details of a trade to a client, what happens next?
The trade details automatically appear in the exchange settlement system
Who issues an assignment notice when an option is exercised?
The clearing house
A future contract where physical delivery of the underlying asset is not practical or possible, is the generic description of:
A contract for difference
At expiry, which of the following is most likely to be exercised automatically?
In-the-money options
Which of the following is an advantage of the automatic exercise system?
Reduce paperwork on expiry
Which of the following choices are available to the writer of a traded option?
To trade out the option by closing their position
Keep the premium if the option is not exercised
What position will the writer of a call on a future be in if the option is exercised?
Short-future
Who calculates the invoice amount?
The clearing house
If an option position is assigned who is responsible for selecting a writer?
The clearing house
Which of the following would set the terms for automatic exercise of a specific contract?
Exchange
The correct calculation of the invoice amount for the cheapest to deliver (CTD) is as follows:
(EDSP x scale factor x price factor) + accrued interest
Which might be a reason that the buyer and the seller of a derivatives trade use alternative delivery procedures?
Both parties are not comfortable with the clearing house delivery terms and conditions
Which of the following is the best description of the difference between the last notice day and other days in the delivery month for the long gilt future?
The seller cannot specify the delivery day
Once a notice of intention to deliver has been filed with the clearing house in respect of the long gilt future, which of the following occurs?
The short decides which bond to deliver during the delivery month
Which of the following best describes an American option?
An option exercisable at any time up to its expiry date
For which type of commodity is delivered quality likely to be least consistent?
Agricultural
What is the name of the document that provides a template on which a deal ticket can be produced?
Term sheet
If an investor holds a cash settled contract, how would this differ from holding a deliverable contract?
Deliverable contracts settle through the physical exchange of the asset; whereas cash-settled contracts do not
