Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Futures Markets > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

forward contract

A

an agreement to buy or sell at a future date for a given amount of a commodity or an asset at a price agreed on today

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

futures contract

A

exchange-traded, standardized, forward-like contract that is marked to market daily

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

cash market

A

market for immediate settlement of transactions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

futures prices

A

prices negotiated in futures market for a futures contract

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

counterparty risk

A

the risk that your counterparty will default

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

clearinghouse

A

separate corporation of a futures exchange response for settling trading accounts & clearing trades

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

delivery month/maturity

A

the month in which a futures contract expires

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

pricing unit

A

unit of price quoted for a futures contract

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

pit/floor trading

A

words and hand signals are used to submit trades

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

electronic trading

A

bids and ask prices are submitted electronically

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

CFTC

A

independent federal agency that has regulatory jurisdiction over almost all persons or entities involved in futures trading

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

tick size

A

minimum increment a given futures contract price can move

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

price limit

A

maximum level that the futures price is allowed to change

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

nearby contract

A

next contract to expire

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

distant contract

A

contract that matures after the nearby contract

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

hedger

A

producers, buyers, and users of underlying products

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

speculator

A

traders who do not have cash market position and cannot take actual delivery of commodity, but hope to make profit by anticipating price changes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

zero-sum game

A

market as all has no profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

scalper

A

speculator who exploits the bid-ask spread and earns money by anticipating short-run price changes

20
Q

long

A

to buy a futures contract

21
Q

short

A

to sell a futures contract

22
Q

long perspective - if price goes up

A

price goes up = gain

23
Q

short perspective - price goes up

A

price goes up = loss

24
Q

offset position

A

to remove yourself from any responsibility

25
Q

take opposite position

A

long positions go short and short positions go long

26
Q

delivery or take delivery

A

long positions take delivery of product and short positions deliver the underlying product to exchange-certified location

27
Q

bull market

A

prices are increasing

28
Q

cash settlement

A

traders receive or make payments at contract maturity rather than physical delivery

29
Q

bear market

A

prices are falling

30
Q

mark-to-market

A

monetary differences for each account are settled by the clearinghouse at the end of each day

31
Q

initial margin

A

amount required when futures position is opened

32
Q

maintenance margin

A

minimum amount that must be maintained at all times

33
Q

margin call

A

call to deposit more funds when equity in margin account falls below maintenance margin

34
Q

volume

A

total number of contracts that changed hands during a period of time

35
Q

open interest

A

total number of contracts that have been traded and not yet liquidated

36
Q

market order

A

buy/sell a certain number of contracts promptly at the current price at the moment

37
Q

limit order

A

specifies price for execution of trade

38
Q

contango

A

futures prices for distant delivery months are higher than the contracts closer to maturity. aka normal market

39
Q

backwardation

A

futures prices for distant delivery months are lower than the contracts closer to maturity. aka inverted market

40
Q

commodity

A

good or service for which the demand has no qualitative differentiation across a market

41
Q

fungibility

A

little differentiation between a commodity coming from one producer and the same commodity from another

42
Q

storable commodities

A

can be stored for an extended period of time without a loss of quality: grains, energy products, softs, and metals

43
Q

nonstorable commodities

A

cannot be stored easily or for extended period of time: livestock products

44
Q

cost of carry

A

cost of buying the commodity today and carrying it to a certain time in the future

45
Q

full carry value

A

cash price today + the cost of carry

46
Q

arbitrage

A

purchasing a commodity at one price and selling at a higher price to profit from price discrepancy

47
Q

market

A

place or situation that puts sellers & buyers in communication with one another, discovers prices, and facilitates ownership transfer

Futures Markets (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions