What is the major difference in the obligation of one with a long position in a futures (or forward) contract in comparison to an options contract? Do they have any risk for the investors? Also give | Homework.Study.com (2024)

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• What is the major difference in the obligation of one with a long position in a futures (or forward) contract in comparison to an options contract?
• What are the primary differences between forward contracts and futures contracts?
• Describe the general differences between a call option and a futures contract.
• Identify the fundamental distinction between a futures contract and an option on a futures contract; and explain the difference in the manner that futures and options modify portfolio risk.
• What is the difference between entering into a long forward contract when the forward price is $30 and taking a long position in a call option with a strike price of $30 (10%)
• Describe a put option on interest rate futures. How does it differ from selling a futures contract?
• What are the advantages and disadvantages of using an options contract rather than a futures contract?
• 1) Define a futures contract. 2) Discuss the similarities and differences between forward and futures contracts.
• What fundamental differences are there between a forward contract and a futures contract as instruments to hedge against foreign exchange fluctuation risk?
• Describe a call option on interest rate futures. How does it differ from purchasing a futures contract?
• How does a futures contract differ from a forward contract?
• What is a forward contract? How does that differ from a futures contract? What does a standard futures contract include?
• What risk is the risk that the position being hedged by a futures contract is not affected in the same manner as the instrument underlying the futures contract?
• Which contract has more counterparty risk, a forward contract or a futures contract? Explain your answer.
• a) What is the difference between portfolio risk and stand-alone risk? b) What is the relevance of each to an investor (or, is each relevant?)? c) As an investor, how do you consider each in making investment decisions?
• Explain the difference in the gain and loss potential of a call option and a long futures position. Under what circ*mstances do you think someone would prefer the option to the future, or vice versa?
• How do forward contracts differ from futures contracts?
• 1) What is the difference between the futures price and the value of the futures contract? 2) Evaluate the criticism that futures markets siphon off capital from more productive uses.
• Explain the three ways in which futures contracts and forward contracts differ.
• How can futures contract be used to speculate in the U.S. equity market? What types of futures contracts can be used? Be specific.
• What are the main differences between futures and forward markets?
• What is the difference between long position and short positions in commodity futures trading? When is it appropriate to take either short of long position? What are the best strategies in commodity f
• Compare long-term instruments and short-term risks, in terms of the various types of risk to which investors are exposed. Explain.
• What are the primary differences between spot, forward, and futures contracts in the foreign exchange market? How and when would an MNC headquartered in the United States use these contracts to manage currency risk involved with sales from its manufacturi
• What are the differences between futures and forward markets?
• What are the important characteristics of forward, futures, and option contracts, and in what sense can they be interpreted as insurance policies?
• A) What are the differences between futures and forward markets? B) What are the pros and cons associated with using each one?
• Are hedging with forwards and futures contracts the same, or are there different risks to be considered when using these two contracts? Explain your answer.
• What is the difference between fundamental risk and price risk?
• What are the differences between foreign currency option contracts and forward contracts for foreign currency?
• How are futures options used, and what are the reasons for their popularity compared to spot options?
• What are the main differences between equity and bond in terms of cash flow volatility and maturity?
• 1. How might long-term investors benefit from vigorous competition among short-term traders? 2. How does trading differ from speculating?
• What is an option on a futures? Explain the workings of this derivative contract.
• Which of the following is not an important characteristic of short-term marketable securities? A. Maturity risk, B. Marketability, C. Taxability, D. Default risk, E. All of the above are important.
• What are the advantages of a currency options contract as a hedging tool compared with the forward contract?
• Evaluate the potential gains and losses for forwards, futures, call options, put options, and swaps. Outline and describe the different risks that each type of derivative contract faces. Describe diff
• For futures contract to be successful, what characteristics should the cash market have? What might be the reasons why some futures contracts fail?
• Describe the general characteristics of a futures contract. How does a clearinghouse facilitate the trading of financial futures contracts?
• What are the most important factors to you when choosing your brokerage firm for stock, options, and futures trading and investing?
• How does the risk of short-term funds differ, from that of long-term funds?
• 1a. Despite the fact that forward contracts carry more credit risk than futures contracts, forward contracts offer what primary advantage over futures contracts? a. the over-the-counter forward market
• What is the difference between initial margin and variation margin of a futures contract? Provide... 1 answer below What is the difference between initial margin and variation margin of a futures co
• What is a closing transaction on a futures contract? Do you need to take delivery to terminate a futures contract position?
• What is basis risk in relation to futures contract hegding?
• How can an investor use forward and futures contracts to speculate on a particular view about changing market conditions?
• Explain the difference between a short hedge and a long hedge? A. What is the basis? B. How is the basis expected to change over the life of a futures contract? C. Explain why a strengthening basis benefits a short hedge and hurts a long hedge.
• When comparing futures and forward contracts, it has been said that futures are more liquid but forwards are more flexible. Explain what this statement means and comment on how differences in contract liquidity and design flexibility might influence an in
• Which of the following statements about forwards, futures, and options is correct? a.Forward contracts and futures contracts are economically similar, but vary greatly in how they are traded. b.Futures contracts and options contracts are economically
• What is meant by convenience risk? Is this important to the bond investor?
• What is the difference in cash flow between short-selling an asset and entering a short futures position?
• Why does a futures contract have zero value, when it is first written? What is marking-to-market, for a futures? Why is this marking-to-market important, for reducing counterparty risk?
• Provide three examples of financial futures and describe how investors would use these contracts. Discuss how bond options can be used for hedging strategies.
• Under what conditions would speculators sell a call option? What is the risk to speculators who sell put options?
• What is a call option? What is put option? What is a future contract?
• To what extent do investment managers use indices as opposed to individual futures contracts to gain a commodity exposure?
• Which of the following criteria is generally least important in selecting marketable securities for inclusion in the firm's portfolio? a. length of maturity b. yield c. marketability d. default risk
• What economic conditions would prompt investors to take advantage of a bond's convertibility feature?
• Hedgers trade price risk for basis risk. What is meant by this statement? In particular, explain the concept of the basis in a hedge transaction and how forward and futures contracts can be selected to minimize risk.
• Define: a. Forward contract b. Futures contract
• What is the difference between market risk and idiosyncratic risk?
• What are the primary differences between investments in corporate stock versus corporate bonds? Explain.
• What are the differences between credit risk, market risk, and operational risk?
• A) What is the difference between a diversifiable risk and a non-diversifiable risk? B) Should stock portfolio managers try to eliminate both types of risk?
• Explain speculation with a futures contract.
• What are differences between "market risk modeller" and "quantitative analyst" in financial companies like Goldman Sachs?
• From an investor's standpoint, what are the key differences between Treasury and agency issues?
• A) What is a real option? B) How do real options differ from financial option contracts?
• Provide three examples of financial futures and describe how investors would use these contracts.
• What effects does marking to market have on futures contracts?
• Explain the difference between selling a forward contract for delivery at $100 in one year, buying a put option struck at $100 expiring in one year, and selling a call option struck at $100 expiring i
• How are forward contracts, put options, and call options related to one another?
• Explain how differences in allocations between the risk-free security and the market portfolio can determine the level of market risk.
• How should you explain to a prospective investor the benefits, risks, and alternatives available among government securities?
• What are the differences/similarities of common stocks and bonds? Explain how they would be used in the corporate environment.
• Define money management. How does it differ from long-term investment or long-term borrowing decisions?
• What are the differences between equity, shares, bonds, debentures, etc.? What are all the other terms related to these words?
• What are some advantages and disadvantages of the general contract approach?
• What is the relationship between risk and return? What is the significance of this relationship for the investor?
• Futures contracts and options contracts are economically similar but vary greatly in how they are traded. True or False?
• 1. Describe the various types of risk to which investors are exposed. 2. What is meant by the risk return trade-off? What is the risk-free rate of return? 3. Briefly describe the two basic sources o
• What are the advantages and disadvantages of using forward contracts instead of swap contracts to manage a company's foreign exchange rate risk?
• The currency speculator who sells futures contracts assumes the risk that someone else doesn't want to assume. Explain what the above statement means.
• What are the similarities and differences between options and warrants?
• How do surety bonds differ from insurance contracts?
• Explain why some futures contracts may be more suitable than others for hedging exposure to interest rate risk.
• Explain the differences among the three means of terminating a futures contract: an offsetting trade, cash settlement, and delivery. How is a forward contract terminated? Explain the difference betwee
• a. What is the primary difference between financial statement analysis and operational analysis? b. Why are both types of analyses useful to healthcare managers and investors?
• What are the disadvantages of hedging with currency options as opposed to forward contracts?
• What advantages do convertible securities offer investors? What are the risks associated with these investments?
• What are relative risks of long term investing in the index funds using dollar cost averaging and 1.5:1 leverage, compared to directly index funds?
• Explain the differences between call and put options. Are they just the exact opposites of each other? Explain the differences between long and short in the stock market. Explain how one shorts a st
• What are the differences between a flexible short-term financing policy and a restrictive one? What are the pros and cons of each?
• Explain the basic differences between the operation of a currency forward market and a futures market.
• Why might individuals purchase futures contracts rather than the underlying asset?
• a) What is the purpose of requiring a margin on a futures or option transaction? b) What is the difference between an initial margin and a maintenance margin?
• What are debentures? How do they differ from subordinated debentures?
• What advantages and disadvantages do bonds offer investors relative to stocks? What type of investors are likely to be interested in bond funds versus stock funds?
• When holding a futures contract long, if you do not want to take delivery of the underlying asset, what transaction must you perform? Explain.
• In considering investments with different degrees of risk, what two factors will influence an investor's decision? What is an appropriate investment for an individual who needs funds in a short period of time for necessities?