| A | B |
|---|
| E-mini Russell 2000 Futures do not have an annual management fee | (1) True |
| The IWM ETF (iShares Russell 2000 ETF) does charge a fee | (1) True |
| ETFs can be held in perpetuity | (1) True |
| E-mini Russell 2000 Futures Contracts have distinct quarterly expiration cycles | (1) four times a year: March, June, September, December |
| If you wanted to maintain your futures position, you would have to: | (1) roll the E-mini Russell 2000 futures throughout the year, incurring some additional costs (2) the additional cost is minimal, and lower than incurring the 20-basis point management fee on the IWM ETF |
| ETF | Exchange Transfer Funds |
| Intra-MKT Spreads | (1) are also referred to as calendar spreads |
| There are primarily two types of futures spreads: | (1) an intra-market spread (2) an inter-market spread |
| Intra-market Spread | (1) is where a trader buys and sells futures contracts on the same underlying, but does so in different delivery months |
| Inter-market Spread | (1) is where a trader simultaneously buys and sells two differing futures contracts |
| RTY | (1) CME’s E-mini Russell 2000 Index Futures Contract (2) expire on a quarterly basis |
| A single RTY contract has a value of $50 times the agreed upon E-mini Russell 2000 futures price | (1) and trades in increments of 0.10 index points, with 1 tick equaling five dollars. |
| The difference between the futures price and the spot price is referred to as the basis | (1) True |
| Futures orders on the CME Group Exchange are filled based on | (1) matching algorithms |
| Margin Requirements reduce risk for both traders and the exchange | (1) true |
| All of the following are market integrity controls established by the Exchange | (1) circuit breakers (2) price banding (3) velocity logic |
| if a trader wants to buy a futures contract at a specific price they will: | (1) use a limit order |
| The following are used when comparing cost efficiencies of Nasdaq-100 futures and the Nasdaq-100 ETF | (1) roll richness (2) commissions (3) annual expense ratios |
| The following are advantages of futures over EFTs | (1) capital efficiencies (2) 24-hr trading (3) more favorable tax treatment |
| FANG refers to | (1) FB (2) Amazon (3) Netflix (4) Google |
| Monetary Policy | (1) the process by which the Central Bank controls the flow of money in circulation |
| Federal Reserve | (1) controls how much money is in our economy |
| During A Recession | (1) there is an increase in the money supply |
| During Inflation | (1) there is a reduction in the money supply |
| Interest | (1) is the cost or price of using somebody else's money |
| When you borrow money | (1) you pay interest |
| When you lend money | (1) you earn interest |
| The Feds has 3 tools to regulate the money supply | (1) changing the reserve requirements -- how much money banks can loan (2)setting the discount rate -- fee banks pay for borrowing money from the Fed (3) buying/selling bonds -- a government IOU |
| The Reserve Requirement | (1) the amount the bank must hold in case the customer wants a withdrawal |
| Economy is in recession/depression | What will the Feds do to the Reserve Requirements? lower it |
| The economy is expanding too fast (inflation) | What will the Feds do to the Reserve Requirements? increase it |
| If the economy is weak (recession) | (1) the Feds will reduce the reserve requirements so the banks have more money to lend consumers |
| When the Reserve Requirement is reduced | (1) banks can lend more money to consumers (2) consumers have more money to spend (3) businesses make more money 4) the economy expands (5) more money in the economy |
| If the economy is strong (inflation) | (1) the Feds will increase the reserve requirements and banks will have less money to loan consumers |
| When the Reserve Requirement is increased | (1) banks have less money to lend (2) consumers can't get loans from banks (3) consumers have less money (4) consumers have less/no money to spend (5) lower prices on the cost of goods cause inflation to ends |
| The Discount Rate | (1) is the fee the bank pays the Fed to borrow money |
| When the economy is in a recession/depression | What do the Feds do to the discount rate? Lower it |
| When the economy is expanding too fast (inflation) | What do the Feds do to the discount rate? Increase it |
| If the economy is weak/recession | (1) decreasing the discount rate makes it cheap for the banks to loan money |
| With a weak economy, decreasing the discount rate | (1) allows the feds to charge banks less to borrow money (2) allows banks to give loans to consumers at a lower interest rate (3) allows consumers to take loans, spend money which expands the economy |
| If the (inflation)is too strong | (1) the Feds will increase the discount rate making it expensive to borrow cash |
| With a strong economy(inflation), increasing the discount rate | (1) allows the Feds to charge banks more to borrow money (2) allow banks to either loan less money or to loan money at a higher interest rate to consumers (3) allow consumers to take loans at high interest rates -- consumer reject higher interest rates; have no money to spend. This kills inflation as money is taken out of the economy |
| A US Bond | (1) is an IOU (2) a loan from the government |
| The Feds will sell bonds to consumers | (1) if the economy is growing to fast (inflation) |
| The Feds will buy bonds from consumers | (1) if the economy is in a recession/depression |
| Rapid economy growth/expansion | (1) allows the feds to sell bonds to consumers (2) allows consumers to withdraw their money from the bank to buy bonds (3) limits the amount of money banks have to make loans to consumers (4) limits/inhibits the borrowing capacity of consumers from banks, therefore, businesses can't make money -- economy slows down |
| Slow or weak economy growth (recession) | (1) allows the Feds to buy back bonds (2) allows consumers to exchange in their bonds for money (3) allows consumers to deposit the money in their bank accounts (4) allows banks to have more money to lend consumers (5) allows consumers to take loans and spend money (6) pumps dollars into the economy (expansion) |
| When Is Inflation Good For You? | If you’re in debt, you get to pay off your debts in devalued dollar; in dollars that are worth less than when you created the debt |
| If too much money is in the system you get | a demand pull |
| If The Light Switch Is On | Risk on: consumers are looking for risk – high yields |
| If The Light Switch Is Off | Risk off -- there is lower risk -- low yields |
| Cash In The Bank | is low risk due to being insured |
| The Stock MKT Is High Risk | (1) very risky due to not being insured (2) value can go to zero quickly & at any moment |
| Financial high: | (1) reflect the flow in money (2) MMs do not move money out of the mkt; they move money from one mkt to the next mkt |
| Forex Mkt | (1) connects all mkts because it is the intermediary mkt (2) is like an airport -- all of the different mkts land there -- have hubs there -- all hook up to the 4X mkt. |
| Risky Indices | are stocks held up and supported by stock/equities |
| Risk On | (1) CAD -- oil (2) AUD -- gold (3) NZD -- agriculture/exports |
| Safe Havens (Risk Off) | (1) USD (2) CHF (3) JPY |
| EUR & GBP | (1) are risk on in politics |
| How do I know when light is on vs off? | (1) look at PUTS volume (2) VIX measures options/puts options |
| Currency & economy are different animals | (1) They have an inverse relationship (2) what’s good for the economy is not necessarily good for the currency i.e., inflation is good for the economy, but a lot of money flowing into the economy cheapens & weakens the currency |
| Apart from bringing buyers and sellers together and organizing the contracts into standard units | (1) many large future exchanges also provide settlement and clearing services |
| Futures Exchanges | (1) are central marketplaces where investors can trade standardized futures contracts |
| Futures Exchange Markets | (1) They provide the necessary liquidity by bringing buyers and sellers together (2) most also provide clearing & settlement services which help to reduce the risk of counterparty defaults |
| A derived | (1) is a financial security with a value that is reliant upon or derived from, an underlying asset or group of assets—a benchmark (2) is a contract between two or more parties (3) get its price from fluctuations in the underlying asset |
| The most common underlying assets for derivatives are | (1) stocks, bonds, commodities, currencies, interest rates, and market indexes |
| A change in the value of the underlying | (1) causes a change in the value of the derivative contract |
| Derivatives have 2 main uses | (1) to hedge risks (2) the objective of minimizing risk in the physical market |
