Future's Terminology Flashcards

1
Q

What is an Omnibus Account

A

When an FCM’s customer acct gets cleared through a different FCM

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2
Q

First Day Notice

A

First day a short can issue a delivery notice

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3
Q

Futures in General

A

On Exchange; purpose: hedging or risk shifting; No transfer of ownership; Short term; Profits by changes in prices; needs constant monitoring by customer; Regualted by CFTC and NFA

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4
Q

Stocks in General

A

On Exchanges or OTC; Purpose: capital formation, appreciation and income; transfer of ownership at execution; long term; profits by appreciation and dividends; need active monitoring; SEC and FINRA

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5
Q

Futures vs Forward

A

Futures: Exchange traded, standardized terms cleared, hedging, margins are guarantee, market 2 market

Forwards: Private (not exchange), negotiated terms, not cleared, commercial contract, collateral as guarantee, not market 2 market

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6
Q

Why Futures Market?

A

To shift risk
Hedgers have risks they don’t want
Speculators are willing to accept those risks for an opportunity to profit
Fungibility enables risk transfer
Relationship between cash and futures prices

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7
Q

Fungibility

A

The characteristics of Interchangeability

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8
Q

What’s the only thing negotiated in a futures contract?

A

Price and Quantity

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9
Q

What’s a futures contract

A

Standard In the following:

Contract Terms
Delivery Grade
Delivery Points
Delivery Months (options)
Cash settle vs physical delivery
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10
Q

Offset

A

When a futures contract is terminated by a transaction that is equal and opposite from the one that initiated the position

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11
Q

Key Features of Futures Contracts

A

Buyers receive delivery
Sellers make delivery
Liquidation through offset or delivery
Can be traded on more than 1 exchange

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