t/f questions
39) Forwards \& Futures: A futures contract is similar to a forward contract, differing more importantly in the aspects of standardization and daily marking to market, which is the process by which gains and losses on futures contract positions are settled daily. Futures contracts can be used for hedging or speculating. 40) Open Interest (OI): OI reveals the number of contracts in effect. With options, OI is used to gauge other investors' interest in the trade. 41) Futures Markets: "Backwardation" futures markets are those in which spot prices are lower than futures prices while "Contango" futures markets are those in which spot prices are higher than futures prices. 42) Long or Short Futures: The trader taking the long position commits to selling the commodity on the delivery date while the trader taking the short position commits to buying (both happening on the same date). 43) Futures Profitability and Zero-Sum Game: The profit to a long futures contract is the spot price at maturity minus the original futures price. The profit to a short futures contract is the original futures price minus the spot price at maturity. When summed, the profits to the long and the short suggest that futures contracts are a zero-sum arrangement. 44) Basis Risk and Convergence: While the futures price and the spot price must converge at maturity, the basis defines the difference between the futures price and the spot price. Basis risk is assumed over the life of the contract, except at maturity where convergence occurs. 45) Financial Cost of Carry: The financial cost of carry is determined by the relative costs of buying a stock with deferred delivery in the futures market versus buying it in the spot market with 39) Forwards \& Futures: A futures contract is similar to a forward contract, differing more importantly in the aspects of standardization and daily marking to market, which is the process by which gains and losses on futures contract positions are settled daily. Futures contracts can be used for hedging or speculating. 40) Open Interest (OI): OI reveals the number of contracts in effect. With options, OI is used to gauge other investors' interest in the trade. 41) Futures Markets: "Backwardation" futures markets are those in which spot prices are lower than futures prices while "Contango" futures markets are those in which spot prices are higher than futures prices. 42) Long or Short Futures: The trader taking the long position commits to selling the commodity on the delivery date while the trader taking the short position commits to buying (both happening on the same date). 43) Futures Profitability and Zero-Sum Game: The profit to a long futures contract is the spot price at maturity minus the original futures price. The profit to a short futures contract is the original futures price minus the spot price at maturity. When summed, the profits to the long and the short suggest that futures contracts are a zero-sum arrangement. 44) Basis Risk and Convergence: While the futures price and the spot price must converge at maturity, the basis defines the difference between the futures price and the spot price. Basis risk is assumed over the life of the contract, except at maturity where convergence occurs. 45) Financial Cost of Carry: The financial cost of carry is determined by the relative costs of buying a stock with deferred delivery in the futures market versus buying it in the spot market with
