Random Flashcards
If a trader buys or sells a futures contract, he is contingently liable for:
Are spread positions on Commodities less risky?
Not necessarily. AP’s should NOT recommend this based on risk
The June S&P 500 futures settles at 2,463.65. However, on the next day it closes at 2,459.80. If the S&P 500 futures contract multiplier is $250, what’s the dollar value of this change?
simply take the closing value of 2,463.65 and subtract the ending value of 2,459.80, which equals 3.85 points. The 3.85 difference is then multiplied by $250 to arrive at a dollar value of $962.50
T or F - If the price of a commodity becomes extremely volatile, margin is increased and leverage is decreased.
True - Margin requirements are increased if the market price of the commodity becomes volatile.
When futures prices are higher than the cash price, the market would be:
At a premium
When futures prices higher than cash, and distance futures higher than near futures, this is called a “premium market” or a “carrying charge market”.
What is an “inverted market” or “discount market”
both refer to a market where cash prices are higher than futures prices. And near term futures higher than distant
T or F - A speculator may avoid exceeding the CFTC speculative position limits by establishing his position on two different exchanges.
False - The limits the CFTC establishes for trading AND position limits in certain commodities apply to ALL exchanges
What is an ascending triangle pattern
technical chart with a horizontal line to be drawn along the swing highs and a rising trend line. Its a bullish trend. A decending traingle is oposite
What is a flag and penant pattern?
Can be bullish or bearish depending on market backdrop. Where there is a trend line up or down that forms a consolidation in a a pattern before braking out
A customer enters an order to buy two July copper contracts at 104.35. The floor broker reports that he bought the two contracts at 104.55. When the floor trader is contacted, he acknowledges that he made an error in executing the order above the limit price. In this case who is responsible?
The floor broker would be responsible to the customer for any loss that is incurred as a result of the error
What is a vertical spread
the purchase and sale of the same type of option, with the same expiration date, but a different strike price.
What is a horizontal spread
the purchase and sale of the same type of option, with the same strike price, but a different expiration date
What is a short/long straddle
A short straddle is the sale of a call and a put.
Long straddle is the purchase of a long an put
Both with same strike
What is demand Eleasticity?
The sensitivity of the quantity demanded for a given price change.
There’s an inverse relationship between the price of a commodity and quantity demanded for the commodity. As the price falls, the quantity demanded increases. The degree to which the quantity demanded responds to a price change is referred to as demand elasticity.
The CEA Commodity Exchange Act says that felony criminal violations are punishable by fine up to how much?
$1mm (no more)
Felony criminal violations of the Commodity Exchange Act may be punishable by all of the following, EXCEPT:
Expulsion
Suspension
A fine of +$1m
Prison term NOT more than 10yrs
A fine more than $1m
If futures trade at the daily limit, what happens next?
Trading continues at prices in between the limits until the end of the trading session
trades will take place at the limit up price or below OR at the limit down price or above
Copper is quoted as _____ per pound
cents
What is the T-Bond contract size?
100,000
A customer fails to meet a margin call. In this case, the broker:
May liquidate all or part of the customer’s position to meet the amount of the call
If someone is short a call options on a Wheat contract and the options is exercised, what happens to the seller?
the sellers assumes a short futures position upon exercise
If the buyer of a future call option decides to exercise the seller will….
be assigned a short future position. Thats because the seller received a premium to sell the option and assumes the obligation to sell futures contracts if contract exercised. If they didnt own underlying contracts they would be assigned short
What is a liquidating market?
one in which the open interest is decreasing at the same time that prices are declining.
When does the transfering of ownership of a commodity take place?
When the commodity is delivered
Who must time stamp orders that are received from an introducing broker (IB)?
Both the IB and the FCM
Both the ___ and ____ are required to time stamp orders within ___ of entry
IB, FCM, 1 minute
What si price elasticity?
The direct relationship between the price of a commodity and the quanity supplied.
As price falls, quantity supplies also falls
If a trader buys or sells a futures contract, he is contingently liable for:
The full value of the contract/commodity if there is a delivery. Full liability in effect until he offsets position
When prices advance or decline to the daily price limit…what can happen next? Can trading continue? at what levels?
Trades may be made at or below the top limit and at or above the bottom limit
How are T-Bills and T-Bond quoted?
T-Note and Bond futures quoted as a percentage of par (100,000) in a min tick value of 1/32 ($31.25)
T-Bill are quoted in percentage points (1bp) where min is 1bp worth $25.
How are premiums for T-Note and Bond call/put options quoted?
in 64ths not 32nd
Spread traders who believe futures prices will converge (i.e spread ____). Will do what?
what about if futures inverted
Narrow
will buy the cheaper contract and sell the more expensive.
If inverted, the spread narrowing still applies and a trader will buy cheaper and sell expensive.
If you take a long or short on a certain exchange, can you offset it at any other exchange (if regulated by CFTC)?
NO - it must be on the exchange of the original position
An individual has a profit of 2-04 on two T-note futures contracts. What’s the total profit?
$ 4,250
For T-note futures contracts, 1 full point equals $1,000 (i.e., 1% of $100,000 par) and 1/32nd of a point equals $31.25 (i.e., 1/32% of $100,000 par).
A profit of 2-04/32 equals $2,125 (2 x $1,000 + 4 x $31.25).
Since there are two contracts involved, the total profit is $4,250.
For T-note future contracts what is 1 full point equal to?
$1,000
(i.e 1% of $100,000 par)
For T-note futures 1/32nd of a point equal what?
$31.25
(i.e 1/32% of $100,000)
On commodity futures exchanges, what is a call market?
A call market is one in which trading occurs in rotation for each individual contract and is usually done at the opening of trading. After each contract month has been individually opened, trading will occur simultaneously in all contracts.
