Trading in Stock Index Futures

question 40

Multiple Choice

Trading in stock index futures

• A)now exceeds buying and selling of shares in most markets.
• B)reduces transactions costs as compared to trading in stocks.
• C)increases leverage as compared to trading in stocks.
• D)generally results in faster execution than trading in stocks.
• E)All of the options

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Definitions:

Put Contract

A financial contract giving the holder the right, but not the obligation, to sell a specific amount of an underlying asset at a set price within a specific time.

Put Premium

The price that an investor pays for the right, but not the obligation, to sell a security at a specified price before a certain date.

Maximum Profit

The greatest possible gain that can be achieved from an investment, taking into account the cost basis and market conditions.

Stock Option

A financial derivative that gives the holder the right, but not the obligation, to buy or sell a stock at a predetermined price within a specific time period.