Question

1.In which hedging tool would you pay a premium to another party even if you do not eventually use the tool?

Future Contracts

Forward Contracts

Option Contracts

Swap Arrangement

none of the above

2.Paul Tudor Jones is a Futures Trader. While he will take a position and trade          
Futures Contracts on almost anything, his speciality is          
          
Wheat Futures          
Interest Rate Futures          
Stock Index Futures          
Gold Futures          

please help me these two

Answer 1

1. Option premium is always paid along with the intrinsic value and time value of the options for buying an option. It keeps on varying according to different market scenario and it is paid to another party even if you donot use the tool.

So option premium consists of two factors intrinsic value & time value and it is paid even through you're not using the tool.

There is no concept like future & forward premium except for the difference between spot & future value.

So correct option is (C) Options contract.

2. Paul Tudor Jones is famous for managing hedge funds and has a knack of trading in stock futures.He is specialised in trading stock futures and it could be well found out in his documentary "Trader" which is based upon 1987 stock market crash.

So the correct option would be (C) Stock Index Futures.