Question

How is a futures contract similar to an option contract? 1. They are both exchange traded...

How is a futures contract similar to an option contract?

1.

They are both exchange traded
2.

Buying a futures contract or an option contract obligates you to buy the underlying commodity at a future date
3.

Bot futures contracts and option contracts have a strike price.
4.

None of the above are true.
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer is 1. They are both exchange traded

1) Futures contracts and options contracts are exchange traded.

2) Buying a futures contract obligates the buyer to buy the underlying commodity at future date. The buyer of an option has the right to buy the underlying asset but not an obligation .

3) Futures contracts does not have a strike price. Options contracts have strike price. Strike price is the price agreed today for a transaction to take place on maturity date.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
When the foreign exchange (FX) futures market is used for price discovery: One will generally not...
When the foreign exchange (FX) futures market is used for price discovery: One will generally not see steadily appreciating or depreciating pricing patterns, with price discovery occurring on contract expiration dates in the FX market. FX forward prices are subjective predictors of future spot exchange rates. The pattern of the prices of these contracts provides information as to the market’s current belief about the relative future value of one currency versus another at the scheduled expiration dates of the contracts....
1) An interest rate cap: A) obligates both parties to trade at a preset price at...
1) An interest rate cap: A) obligates both parties to trade at a preset price at a future date B) gives one party the right to buy an underlying good in the future at a preset price C) gives one party the right to sell an underlying good in the future at a preset price D) sets the maximum interest rate paid/received E) none of the above 2) The buyer of a put option agrees to: A) buy the underlying...
There are two parties to a futures contract. One party in this contract who has a...
There are two parties to a futures contract. One party in this contract who has a long position in the contract, is doing which of the following: Group of answer choices This person gives a commitment to sell a certain commodity at a certain price at a future date. This person has an option to buy a certain commodity at a certain price in future This person has a very long time horizon and plans to hold the contract open...
Consider an exchange-traded put option contract to sell 500 shares with a strike price of $40...
Consider an exchange-traded put option contract to sell 500 shares with a strike price of $40 and maturity in four months. Explain how the terms of the option contract change when there is a) A 10% stock dividend b) A 10% cash dividend c) A 4-for-1 stock split
Consider a fairly illiquid futures contract that has not traded for days. How would the exchange...
Consider a fairly illiquid futures contract that has not traded for days. How would the exchange come up with its settlement price?
The buyer of a futures contract Question options: A. may not sell the contract without the...
The buyer of a futures contract Question options: A. may not sell the contract without the permission of the original seller. B. assumes the long position C. assumes the short position D. has the obligation to deliver the underlying financial instrument at the specified future date. A futures contract can be defined as Question options: A. an agreement on the delivery of a commodity or financial instrument at an agreed-upon future date at a currently agreed-upon price. B. an agreement...
Contrast an option with a forward or futures contract. Could either or both of these contracts...
Contrast an option with a forward or futures contract. Could either or both of these contracts have negative value to you?
Future on corn are traded on the CME (Chicago Mercantile exchange). Each contract is for 5,000...
Future on corn are traded on the CME (Chicago Mercantile exchange). Each contract is for 5,000 bushels of corn each. You decide to enter 10 contracts to purchase 50,000 bushels of corn at a price of $300.48 per 5,000 bushels. On the maturity date of the contract, the spot price for 5,000 bushels of corn is $282.03. When the contract is settled you will have made a total profit (loss as a negative number) of ...
Which of the following statement describes an option contract and the major distinction between a call...
Which of the following statement describes an option contract and the major distinction between a call and a put option? Select one: a. A call option contract gives a buyer the right not the obligation to purchase an underlying security at certain price specified in the call option contract. b. A put option contract gives a buyer the right not the obligation to sell an underlying security at certain price specified in the put option contract. c. An option is...
1. Which of the following statements regarding futures contracts is false? a)      Both the buyer and...
1. Which of the following statements regarding futures contracts is false? a)      Both the buyer and the seller can get out of the contract at any time by selling it to a third party at the current market price. b)      Futures prices are not prices that are paid today. Rather, they are prices agreed to today, to be paid in the future. c)      Futures contracts are traded anonymously on an exchange at a publicly observed market price and are generally...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT