Arec 487- Test 1

1. 1The margin usually represents 25% to 30% of the value of the underlying futures contract

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2. 2The basis is $1 over and the local cash price is $60.00/cwt the futures price is $61.00/cwt

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3. 3The open interest is the number of positions that have been closed in the previous trading day

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4. 4Hedgers have higher maintenance margins than speculators

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5. 5In the live cattle market, as the maturity date of contract approaches, the difference between the cash price and future price keeps the same sign.

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6. 6Margin changes during the year

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7. 7For storable commodity, the following inequality is (empirically) very rare: Current future price > Current spot price + Storage costs

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8. 8If I expect the future price of lean hog contract to be high in the future, I should buy a futures contract in order to profit from this increase.

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9. 9Spreaders usually hold many uncovered open position at the same time

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10. 10You bought a December lean hog futures contract. You can offset this position by buying another December lean hog contract

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11. 11For corn, there is a futures contract for every month of the year

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12. 12Buyer and Seller of the same futures contract will both gain if the final price (price at terminal day) is high

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13. 13The margin account of a futures contract is settled every week

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14. 14Futures contracts provide a pretty good protection against production risks

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15. 15The basis is the difference between the cash price and the spot price

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16. 16time value + intrinsic value = option premium. This equality always holds, any time

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17. 17On a given trading day and for a given commodity, allowed futures price variations are caped at the CBOT

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18. 18Strike prices are auctioned off in the trading pit

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19. 19The initial margin is usually lower than the maintenance margin

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20. 20Scalpers usually have a seat on the exchange

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21. 21We are in January 2017, a producer sells October Live cattle futures at $64/cwt. They expect a local basis minus $1.00/cwt. in October 2017, when the cattle will reach slaughter weight, she will sell them on the spot market and offset her contract.
    Fill the following table which depicts what would happen depending on several possible futures prices:

    

    1. A-8
    2. B71
    3. C63
    4. D63
    5. E63
    6. F63
    7. G63
    8. H67
    9. I63
    10. J62
    11. K59
    12. L55
    13. M-4
    14. N0
    15. O1
    16. P4
    17. Q8
    18. R63

Descripción

Test sobre Arec 487- Test 1, creado por Kristen Guelly el 10/02/2022.

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Kristen Guelly

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