Unit 1

Question 1

Futures

Answer 1

1: Standardize
Quantities
Qualities
Prices
Place
Time

2: Futures contracts are exchanges traded obligation.
A buyer goes long
A seller goes short

Question 2

Contango

Answer 2

Normal market

Carry chargers

Question 3

Backwarddation

Answer 3

Duffy

Question 4

Forward Contracts : - Elements

Answer 4

Quantity of the commodities
Quality of the commodities
Price for the commodities
Time of delivery
Place for delivery

Question 5

Define margin

Answer 5

Margin is

Question 6

Margin mins

Answer 6

Lowest before you have to add more funds

Question 7

Cash Markets or Spot Markets

Answer 7

Cash value of a specific lot of commodities

At a specific place (spot) and time (now)

Question 8

Forward Cash Markets

Answer 8

Forward

Question 9

Basis

Answer 9

Basis

Question 10

Limitation of forward contracts

Answer 10

1: One of the parties in the forward contract could
renege on contract
On : quality, quantity, time, price, and place
2: Little or no liquidity
3: lack of integrity on one or both side of the contract (buyer or seller).
4: No checking (standards)
5:

Question 11

Commodity Producers

Answer 11

1: Processors of the raw commodity
Gasoline : - refiner
Feedlot operators: - beef
Grain elevator :- grain storage

Question 12

Market Liquidity

Answer 12

1: Increase trading in the market keeps the commodity prices current.
2: Liquidity make it easy to convert position in to cash.