Question

7. The margin required for a short index option is generally _____percent plus _________ or minus...

7. The margin required for a short index option is generally _____percent plus _________ or minus __________.
8. Limits and trading halts on price movements in futures are also referred to as ____________ for controlling exacerbated market moves and preventing panic.
9. When hedging a portfolio with futures, it is necessary to use the ____________ ____________ of the portfolio in determining the appropriate number of futures contracts to use.
10. When a futures spread is implemented between two different futures in different markets, it is called a(n) _____________. When executing such a spread, it is important to know whether there is an inherent ____________associated with that spread.
11. From a risk perspective, what is the important difference between a futures or futures options spread and a stock options spread?

Homework Answers

Answer #1

7. 20% plus the premium, or minus out of the money.

8. Circuit Breakers.: The limits and trading halts on price movement of futures is also known as circuit breakers.

9. Exposure.: While hedging a portfolio it is very important to understand the total exposure of the portfolio, so that appropriate futures contracts could be used to match the exposure at risk.

10. Inter-Exchange Spreads. Risk: Inter-exchange Spreads is the position where two different contracts are considered for investments into two different exchanges or markets. While executing such contract position, it is importnat to understand the inherent risk associated with the contracts. Because if the contracts move in opposite direction, it may be a problem for the investor.

For any further queries, plz ask. As per the policy I have answered the first four questions. Thanks.

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