| A | B |
|---|
| Futures MKT | (1) is measured in points |
| Points | (1) are measured in ticks (2) the smallest price increment change that can occur on the left side of the decimal point (3) are different depending on the contract |
| Ticks | (1) distance = how many points that asset actually moves (2) worth = what the actual asset is worth (3) is the minimum or smallest price increment that a futures contract's price can move |
| What are the two sides of a tick? | (1) two sides (a) distance (b) worth |
| Worth | (1) what the actual asset is worth |
| Distance | (1) how many points that asset actually moves (2) what length has the ES asset moved from where it started |
| All Ticks | (1) are different depending on the contracts and what you’re actually trading |
| Minis | (1) $12.50 per tick |
| How many exchanges are there? | (1) 23 |
| Tick Size | (1) as far as financial mkts are concerned, refers to the futures mkt |
| A futures contract is a legal agreement to buy or sell a standardized asset on a specific date or during a specific month that is facilitated through a futures exchange. | (1) True |
| A futures Contract | (1) is a legal agreement to buy or sell a standardized asset on a specific date or during a specific month that is facilitated through a futures exchange |
| Forward and Futures Contracts | (1) are financial instruments that allow market participants to offset or assume the risk of a price change of an asset over time |
| A futures MKT Contract | (1) is distinct from a forward contract (2) are products created by regulated exchanges |
| A futures contract is distinct from a forward contract in two important ways | (1) a futures contract is a legally binding agreement to buy or sell a standardized asset on a specific date or during a specific month (2) this transaction is facilitated through a futures exchange |
| Futures Contracts | (1) are standardized and exchange-traded |
| An Exchange-Traded Futures Contract Specifies | (1) the quality (2) quantity (3) physical delivery time (4) physical location for the given product. |
| The Product | (1) can be an agricultural commodity, such as 5,000 bushels of corn to be delivered in the month of March (2) it can be a financial asset, such as the U.S. dollar value of 62,500 pounds in the month of December. |
| The Specifications of the Contract | (2) are identical for all participants |
| The specifications of the contract are identical for all participants | (1) This characteristic of futures contracts allows buyer or seller to easily transfer contract ownership to another party by way of a trade |
| Due to the standardization of the contract specifications | (1) the only contract variable is price (2) price is discovered by bidding and offering, also known as quoting, until a match, or trade, occurs |
| Price | (1) is also known as quoting |
| CME | (1) is an exchange (2) the exchange is responsible for standardizing the specifications of each contract |
| Contract Specification Includes | (1) contract (2) contract size (3) tick size (4) point value (5) first notice date (6) expiration date |
| The Exchange | (1) guarantees the contract will be honored |
| The Exchange | (1) eliminates counterparty risk (2) provides anonymity to futures market participants |
| Every exchange-traded futures contract is centrally cleared | (1) true |
| Every exchange-traded futures contract is centrally cleared | (1) meaning that when a futures contract is bought or sold, the exchange becomes the buyer to every seller and the seller to every buyer. |
| The Exchange becomes the buyer to every seller and the seller to every buyer. | (1) This greatly reduces the credit risk associated with the default of a single buyer or seller |
| Forward Contracts | (1) do not eliminates counterparty risk (2) does not provide anonymity to futures market participants |
| The CME Exchange | (1) enables participants to enter and exit the market with ease, makings futures markets highly liquid and optimal for price discovery. |
| Who determines a contract size? | (1) The exchange defines the contract size |
| Every Futures Contract | (1) has an underlying asset (a) the quantity of the asset (b) the quality of the asset (c) the delivery location (d) the delivery date. |
| When a party enters into a futures contract | (1) they are agreeing to exchange an asset, or underlying, at a defined time in the future (2) the asset can be a physical commodity like crude oil, or a financial product like a foreign currency. |
| When the asset is a physical commodity | (1) to ensure quality, the exchange stipulates the acceptable grades of the commodity. |
| Each futures contract | (1) specifies the quantity of the product delivered for a single contract, also known as contract size |
| The Exchange | (1) defines the contract size to meet the needs of market participants. |
| A Futures Contract | (1) specifies where the asset will be delivered upon execution |
| Delivery | (1) is an important consideration for certain physical commodity markets entailing significant transportation costs |
| Every Futures Contract | (1) is referred to by its delivery month. |
| CME | (1) Chicago Mercantile Exchange |
| Contract Of Difference | (1) CFD (2) is an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash settled (3) there is no delivery of physical goods or securities |
| CFD | (1) is a clause in a futures contract that stipulates that the buyer will pay the difference between the asset's market value at the time of sale and its value at contract time -- or if the difference is negative, the seller pays the buyer |
| Futures Price | (1) the price of a specific contract |
| The Spot Price | (1) the current price of a commodity |
| How is Spot Price indicated on MT4 | (1) it is the moving yellow line (2) it changes based on speculation, weather, economy, sentiment (3) the price at which an asset can be bought or sold for immediate delivery of the product |
| Spot Price Movement | (1) is going to determine the price of the futures contract (2) the futures price is going to be reflected in that movement |
| Traders Focused | (1) on the futures price of the contract |
| Bid (blue) | (1) current price (and number of contracts) the MKT is willing to buy |
| ASK (red) | (1) current price (and number of contracts) the MKT is willing to sell |
| Day Low (orange) | (1) lowest trade price for the current trading session |
| Day High (purple) | (1) highest trade price for the current trading session |
| Open (aqua) | (1) first trading price of the new trading session |
| Previous Close (dark purple) | (1) last trading price of the prior trading session |
| Volume (olive green) | (1) the number of contracts that have so far been traded during current trading session |
| Open Interest (light blue) | (1) the total number of contracts that exist on the commodity/financial security (2) if a commodity has a very low open interest, there is not a lot of interest in it |
| S&P E-Mini | (1) is the most popular futures MKt right now |
| If There Is A Change In Spot Price | (1) the value of of the contract changes (2) can change for a variety of reasons |
| A Change in the Value of a Contract | (1) is what allows speculatory (traders to make (lose) money from the contract |
| Example of The Value of Points | (1) the ES contract is trading for three thousand seven and point seven five points or three thousand seven and three fourths (3/4) points |
| How is a point measured? | (1) The unit of measure for a point in the futures mkt is known as a tick |
| How is a point measured in a futures mkt? | (1) with a tick |
| How does a tick function? | (1) with two key features the distance and the worth. |
| All Points | (1) are all different depending on the contract |
| ESH | (1) the CME Globex contract code for an E-mini S&P 500 Futures contract expiring in March 2019? |
| Contract Display Codes | (1) are typically one-to three-letters identifying the product followed by additional characters indicating the month and year of expiration |
| Each calendar month expiration is identified by a single letter as follows | (a) January – F (b) February - G (c) March -H (d) April -J (e) May - K (f) June - M (g) July - N (h) August - Q (i) September -U (j) October - V (k) November -X (l) December -Z |
| Expiration Month | (1) the letter following the contract code always indicates the date |
| The Display Code For The E-mini S&P 500 futures contract expiring in January 2019 is: | (1) ESF9 |
| Prior to the expiration date, traders have which of the following options? | (1) close out their open positions (2) extend their open positions without holding the trade to expiration (3) choose to hold the contract and go to settlement |
| Settlement | (1) is the fulfillment of the legal delivery obligations associated with the original contract (2) delivery can/will take place in the form of cash settlement |
| For Some Contracts, Settlement | (1) the delivery will take place in the form of physical delivery of the underlying commodity |
| When a contract is cash-settled | (1) settlement takes place in the form of a credit or debit made for the value of the contract at the time of contract expiration |
| The most commonly cash-settled products are | (1) are equity index (2) interest rate futures (3) although precious metals, foreign exchange, and some agricultural products may also be settled in cash |
| True or False | (1) Tick sizes are set by the exchange and vary by financial instrument? True |
| All Futures Contracts | (1) have a minimum price fluctuation also known as a tick |
| The Tick Size of an E-Mini S&P 500 Futures Contract is equal to one quarter (0.25) of an index point | Since an index point is valued at $50 for the E-Mini S&P 500, a movement of one tick would be: 0.25 x $50 = $12.50 |
| Tick sizes are | (1) defined by the exchange (2) vary (a) depending on the size of the financial instrument (b) requirements of the marketplace. |
| Tick sizes are set | (1) to provide optimal liquidity and tight bid-ask spreads |
| Price limits | (1) are the maximum price range permitted for a futures contract in each trading session |
