- False. Although this is a hedge, it is not anticipatory. He already has a position.
- B. The basis is $1 under November rather than $2 under, so it is strong in historical terms.
- C. The others are false.
- B. The others are false.
- C. Basis describes the relationship between cash and futures prices. Margin is earnest money that a trader must put forth when entering a trade and has no impact on basis. All of the other items do.
- A. In a long hedge, the trader may need to lock in a favorable price for an item that he or she does not yet have in order to deliver a good to a client. Think of the miller who needs a good price on flour to be able to produce bread that he is to sell to customers.
- C. In a normal (contango) market, futures prices exceed cash prices.
- B. Due to the dynamic nature of basis where cash and futures prices move in the same direction, but not by the same amount, a hedge will not completely eliminate risk.
- A. Agricultural commodity contracts offer delivery of the good, but stock index futures must be cash settled as one cannot delivery an index.
Financial AdvisorAre hedge funds worth the hype and exclusivity they exude? Let us take a closer look at what is involved when investing with one.
Personal FinanceWe look at average American debt, credit scores and much more so you can find out how you stack up.
TradingWe look at the top eight advantages of trading futures over stocks.
Small BusinessA transfer price is what one unit of a business charges another unit of the same business for a good or service. The transfer price is usually close to the prevailing market rate when different ...
InvestingThe benefits of ETFs for hedging are clear and investors of all sizes are taking notice.
InvestingSeries A, B and C funding rounds have nothing to do with the alphabet, rather with the development stage of startups raising venture capital.
InvestingGoogle stock comes in two different flavors with different rights for shareholders.
InvestingIt’s important for both hedgers and speculators to know whether the commodity futures markets are in contango or normal backwardation.
TradingLearn about the futures curve and what its shape means for hedgers and speculators.